American factories, subprime delinquencies and house sales : The Indicator from Planet Money The economy is in a weird place right now. It seems like every day there are new numbers coming out that say economic conditions are either great or poor. Today, we bring you some indicators this week — factory output, credit card defaults and housing — and bring some clarity to the tumult.

Factory boom, credit card debt defaults and housing

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I'm Wailin Wong.


And I'm Adrian Ma. And it is time for Indicators of the Week.


WOODS: Some people say thank God it's Friday. I say thank God it's the Indicators of the Week.

WONG: And they will say we've been getting a lot of maybe confusing signals from the economy lately. Today, the S&P 500 stock market index hit a 20% decline from its all-time peak at the start of the year. It didn't last long, but it does mean that - for a little while, at least - we officially went into what's known as a bear market.

WOODS: Yet job numbers are pretty good at the moment, and spending levels are high, so there are actually these bright signs in the economy, too.


MA: So today on the show, we're going to zoom in on three indicators having to do with manufacturing, consumer credit and the housing market. And we're going to try to see if we can illuminate where we are going in this economy.


WONG: OK, Darian, do you want to kick us off?

WOODS: My indicator of the week is 15 years. Factories in the U.S. are at a 15-year high in terms of how busy they are. New numbers out this week show that the last time America's factories were making stuff this fast was in 2007.

WONG: 2007? I still had a flip phone in 2007.

WOODS: Yeah, this is the pre-smartphone era.

WONG: (Laughter) Yeah.

MA: So nostalgic. Those were good times, right?

WOODS: The year just before the global financial crisis.

MA: Oh, right. So the good times were just coming to an end.

WOODS: Exactly. It was the last party for a while. In the meantime, we had the bailouts of General Motors and Chrysler in 2008. We've had many politicians run on a platform saying they were going to boost manufacturing jobs. We've had the tariff wars of China. And to be honest, after all this, there was not a massive revival in American manufacturing. It kind of just plateaued.

But the pandemic and the government response may have changed things. There's been a huge demand for cars especially, but also machinery and all kinds of physical goods - stuff that you buy. And American factories have caught that spending wave. Manufacturing increased for the third straight month in April.

WONG: And it only took a pandemic to get that going?

WOODS: It's not exactly a recipe that you want to repeat. And part of this bump in production is the flipside to another big problem that we've been having in this country - inflation. Those big price rises that we've been having all across the country - the 8.3% inflation - is giving more of an incentive for factories to make more things. And as more things get made, that can bring prices down. It can be one virtuous cycle inside this very complicated economy.

MA: So that's, like, actually some good news about inflation for a change.

WOODS: I don't actually want to be too rosy about this. Most economists do not think inflation is just going to cure itself. It's not all great news.

And another thing about this manufacturing boom is that it may not last. The Fed, as it raises interest rates, might stop the party early. People are going to buy less stuff, probably.

WONG: But Darian, like, how does this make your economic heart feel? You've revealed all of these cold, hard facts - like, what are you feeling?

WOODS: Well, one thing gives me a bit of encouragement, which is the rise of car manufacturing. The fact that carmakers can actually make cars to me is a great sign. We've heard so much about input shortages and chip shortages, and while those are definitely not over, it is encouraging to me that carmakers are getting back to doing their job.

MA: All right. I appreciate a positive indicator. Thank you, Darian.

WOODS: Yeah, anytime.

MA: I'm thinking, though, Wailin, you're about to let some air out of this balloon.

WONG: Here comes Wailin with the little pin to pop your balloon. So my indicator is 11%. That is the percentage of subprime personal loan accounts that are at least 60 days late as of March.

MA: Right, and just for reference, subprime borrowers are folks who tend to have lower credit scores and tend to have more trouble paying back loans.

WONG: That's right. And this data for my indicator comes from Equifax - you know, the big credit reporting firm. And they say that this group of borrowers - the subprime segment - is looking kind of concerning right now.

WOODS: I mean, we all remember the subprime mortgage crisis. But you're talking about personal loans, right?

WONG: Yeah. Equifax says subprime delinquencies in personal loans, credit cards and car loans are going up faster than normal for this time of year. And subprime auto loan delinquencies already hit a record high in February. So this is a trouble spot on an otherwise rosy picture because overall delinquencies in credit cards, for example, are below their pre-pandemic levels. So if you were just looking at kind of the broad landscape, you might miss this one segment that's looking vulnerable right now.

MA: And that's actually a great point because, like we said on the show before, inflation hurts lower-income consumers the most. They are the ones who are least able to absorb the higher prices for stuff like food and gas.

WONG: Yeah. And, you know, data shows that these households have spent their stimulus checks. So if they're also subprime borrowers - you know, people with low credit scores - they might not have that financial cushion to keep up with debt payments and higher prices. And that could be leading to these missed loan payments. So Equifax says they'll be keeping a close eye on these delinquency rates - and so will we.

WOODS: Thank you so much, Wailin. Not such a rosy indicator, but we're getting the full picture of the complicated American economy right now, which brings me to yours, Adrian - house prices and the housing market. Tell me what is going on in the housing market.

MA: My indicator is 2.4% - actually, -2.4%. According to the National Association of Realtors, that is how much existing U.S. home sales declined in April compared to the month before. And that is actually the third straight month home sales have declined, which is pretty interesting because usually as, you know, winter turns to spring, home sales pick up.

WOODS: I guess the rising interest rates are having their effect.

MA: That is definitely a big part of it. Higher borrowing cost obviously means fewer people can afford to buy a house or a condo or, you know, a houseboat.

WONG: (Laughter).

MA: And the National Association of Realtors chief economist - he says that is a big reason for the slowdown in home sales, and it'll probably continue to be in the coming months.

WOODS: And just to be clear, that -2.4% is the decline in the number of houses sold, not the price of those houses being sold.

MA: Yes, that is correct.

WONG: Dare I ask what's happening with home prices?

MA: Well, they are still going up.

WONG: But I was going to buy that houseboat.

MA: Well, I can't tell you what the houseboat market is going to do. But I did look back at the median home sale prices for the country two years ago, early in the pandemic. And does just, like, anyone want to guess what percent median sale prices have increased in the last two years?

WOODS: Twenty percent.

MA: OK, we got 20%, 20%. What do you say, Wailin?

WONG: Ten percent?

MA: Ooh, OK, all right. If this were "The Price Is Right," Darian would be the winner here because it is more than 35%.


WONG: What?

MA: From April 2020 to April of this year, that is how much the median home sale prices for existing homes have gone up.

WOODS: Thirty-five percent. Gosh.

WONG: I cannot believe how bad I did at that game.


MA: OK, so the pandemic has ignited this record increase in housing prices. And in this particular moment, that has got some people whispering a certain B-word.

WOODS: The B-word.

MA: Anybody - any guesses?

WONG: All of a sudden, I can't think of a single word that starts with the letter B.

MA: (Laughter).

WOODS: Bananas?

MA: It isn't bananas.

WONG: Is it boats?

MA: Or (laughter) - it's not boats, either. It is - come on, you guys, you know - it is bubble. It is housing bubble. People want to know, are we in a housing bubble? Like, bubble sort of implies a market that is irrational - right? - lots of speculative investment and prices that just sort of become unhinged from the fundamental conditions that usually dictate a market. But when you step back and look at the country, the market still seems pretty rational. And just sort of as, like, a baseline, the housing supply is still way lower than the demand for it. It has been for years. And so it makes sense that people would pay more for what is available. And then on top of that, you have demand increasing during the pandemic because a lot of people are, like, going to remote work and looking for bigger houses to have home offices in. And that's also going to push up the price.

WONG: So you're saying, Adrian, the market isn't just running on greed and FOMO or YOLO. That would be bubbly.

MA: Yeah, though it probably YOLO - a market that just runs on pure YOLO would - I would pay money to watch that. Would I? I don't know. Maybe that's - now I feel like I've just jinxed us.


WONG: This episode of THE INDICATOR was produced by Jess Kung with engineering from Josh Newell. Fact-checking by Corey Bridges. Viet Le is our senior producer. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.


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