Three troubling bits of economic news hit the headlines Tuesday, throwing into doubt whether the recovery we all believe to be taking place actually is.

First, home prices hit a low in March for the current economic cycle (read: since things started going bad in Summer 2008). Since a peak in 2006 average home prices in the U.S. have fallen 34 percent. In the past 12 months, home prices have fallen 5 percent.

And it’s not just the drop that has economists spooked: it’s the fact that no one sees any relief in sight. Most are referring to the most current slump as the second prong in a double-dip housing price recession. And while technically correct – home prices did improve over a stretch in late 2009 into mid-2010 – the overall price slump going back to 2006 certainly represents the largest home price correction in the history of the country.

The second report was the monthly consumer confidence survey results release for May. Compiled by the Conference Board, the consumer confidence index showed its lowest rating in six months in May. The number was far below analysts’ expectations.

The last report was a bit more technical and Economics-ey. The Chicago PMI – an indicator of manufacturing activity in the upper-Midwest – unexpectedly plummeted to its lowest level since November 2009.

All of these taken together could lead anyone to assume we’re getting ready to slide back into recession (such that we aren’t already there). Indeed, benchmarks for the crappy economic releases seem to be 2009, a year no one would like to benchmark against.

Another official recession could have a profound impact on the ARM industry, obviously. But even if we don’t fall back into a negative growth economic paradigm, the above items should be enough to give any decision maker pause. Home prices and confidence directly impact how much consumers spend. The less spent, the more a recovery struggles, the more it struggles, the less people spend, etc. This will eventually hit the debt collection industry.

All across the ARM space, everyone knows that recovery rates have been paltry. And that’s not going to change anytime soon. But ARM firms have also been comfortable in the knowledge that their supply of work (defaulted credit accounts) has been strong. That will not be the case if consumers stop spending altogether. We could see a market where both account forwarding and liquidation rates are depressed. And I’m not sure we’ve seen that before.


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