Displaying items by tag: Economy

Millennials owe a record amount of debt, and it could become a huge drag on the economy

  • Published in U.S.

US consumer debt is approaching a record 20% of GDP, and millennials owe most of it.

Millennials — 21 to 34-year-olds — hold an estimated $1.1 trillion of the country's $3.6 trillion in consumer debt, according to UBS, as rising student and auto loans outweigh a drop in mortgages.

And all that rising debt is coming with rising default risks. A UBS evidence lab survey found that 52% of people worried about defaulting on any loan over the next 12 months were in the 21 to 34 age group.

That's not good news considering those same individuals are meant to be the largest source of spending on big-ticket purchase items like houses and cars over the next year (see the chart above).

There is already evidence that millennials are changing their spending habits on smaller items where, according to Lindsay Drucker Mann of Goldman Sachs Research, millennials are willing to search for the lowest price on an item or patiently wait for the right deal to pop up.

"We see areas where millennials are willing to spend, but overall, they're not levering themselves up to make their dollars go further; they're being much smarter and much more conservative about their balance sheets," Drucker Mann said on a January episode of Goldman Sachs' "Exchanges at Goldman Sachs" podcast.

Concerns about student loans, of course, have come up before. In early April, New York Fed President William Dudley said that “continued increase in college costs and debt burdens could inhibit higher education's ability to serve as an important engine of upward income mobility.”

But auto-loan debt is another matter. A growing amount of auto loan debt is coming from leasing, with 32%of millennials opting to lease in 2016, up from 21% in 2011, according to a January report from Edmunds. Among households making $50,000 or less, millennials made up 21% of lessees (the largest of any age group).

Should delinquent car payments become an issue because already-squeezed millennials choose

 to pay student loans first, lower-credit-score applicants could have a hard time financing car purchases. If that happens, automakers could be hurt.

And if big-ticket purchases begin to slow down, economic growth expectations may need to adjust.

-Raul Hernandez, Business Insider

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NEDA warns of rice shortage if importation is deferred

MANILA -- The National Economic and Development Authority (NEDA) warned of a possible rice shortage if importation of the commodity is deferred until harvest season is over.

NEDA Secretary General Ernesto Pernia contradicted the position of the Department of Agriculture stopping rice imports while Filipinos farmers are still harvesting, a report by Jam Sisante on Balitanghali said on Wednesday, April 19.

"We don't have the capacity to produce enough rice. We are not really a rice-producing country. Inflation will strike," Pernia said.

Agriculture Secretary Emmanuel Piñol said deferring rice importations for now would not stoke inflation.

"Ang sinasabi lang namin ay idefer muna dahil sasabay sa harvest," he said.

"How can a temporary deferment of importation cause inflation? Paano?" he added.

Should there be excess harvest, the price they sell it at would be too low, which means lower income for the farmers.

A group of economists are also concerned, saying rice prices will increase.

"Peligroso 'yan, sapagkat, una, baka magkamali sila o kaya ma-delay. Lalo na government' yan, may bureaucratic procedure,” said Calixto Chikiamco, president of the Foundation for Economic Reform.

The group wants to put an end to the National Food Authority monopoly on rice imports and for the private sector be able to buy the commodity from overseas. — GMA News

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Trump signs ‘Buy American, Hire American’ order

  • Published in U.S.

KENOSHA, United States — President Donald Trump moved Tuesday to make good on his emblematic pledge to “Buy American, Hire American” by tightening skilled-worker visa rules, but his room for maneuver remains limited without wider congressional reform.
Speaking in Kenosha, Wisconsin — one of the states that carried him to his upset victory last November — Trump vowed: “We’re going to do everything in our power to make sure more products are stamped with those wonderful words, ‘Made in the USA.'”
Like many of Trump’s executive orders to date, his newest decree will have little practical impact, but sends a signal for government agencies to come forward with ideas for reforming the country’s H-1B visa system.
Trump is looking to stamp out “abuses” of the time-limited work permits, which are pervasive in the US high-tech sector, as a first step towards reforming the regime.
Intended for scientists, engineers and computer programmers, H-1B visas have become an important gateway for the many Indians drawn to Silicon Valley. The United States issues 85,000 each year.
Trump’s decree namely instructs the Labor, Justice and Homeland Security departments to tackle abuses and draw up reforms aimed at bringing the program back to its original intent: awarding visas to the most skilled and highly paid applicants.
The Trump administration argues that the current system has led to a “flood” of relatively low-wage, low-skill workers in the tech sector — and in doing so has harmed American workers.
“We believe jobs must be offered to American workers first,” Trump said.
The US Chamber of Commerce voiced immediate reservations: While it agreed there was room for improvement of the H-1B program, it warned the Trump administration not to do away with it altogether.
“It would be a mistake to close the door on high-skilled workers from around the world who can contribute to American businesses’ growth and expansion and make the US more competitive around the world,” the business lobby said in a statement.
The White House sees the decree as a way to spur momentum towards a broader congressional reform of the H-1B scheme — whose outline remains unclear.
“This is a transitional step to get towards a more skill-based and merit-based version,” a US official told AFP. “There is a lot we can do administratively, and the rest will be done hopefully legislatively.”
In his maiden speech to Congress, on March 1, Trump had proposed introducing an Australian-style merit-based system to reduce the flow of unskilled workers into the United States.
Seeking momentum
Trump’s new decree also includes a “Buy American” component, calling for stricter implementation of existing laws that are intended to favor US-manufactured goods in public tenders.
Without making specific new announcements, the Republican president once more pointed the finger at the North American Free Trade Agreement between the US, Canada and Mexico, dubbing it “a complete and total disaster.”
“It’s been very, very bad for our companies and for our workers and we’re going to make some very big changes or we are going to get rid of NAFTA for once and for all,” he warned.
As Trump’s presidency nears the symbolic 100-day mark, the 70-year-old leader is looking to regain momentum on the domestic front after his flagship travel ban was blocked in court, and his vaunted health reform foundered in Congress.
Trump’s promise of an ambitious tax reform — another central campaign pledge that would notably involve slashing corporate taxes — is also struggling to take shape.
“Our tax reform and tax plan is coming along very well,” Trump said in Wisconsin. “It’s going to be out very soon.”
But Treasury Secretary Steven Mnuchin acknowledged in the Financial Times earlier Tuesday the reform would likely be delayed, calling the target of getting it through Congress before August “highly aggressive to not realistic at this point.” CBB

Agence France-Presse

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