Confidence, Public Perception and Collectability

Aside from calamity, few things have a more acute impact on consumer sentiment than price increases on consumer goods.  U.S. households devote both time and energy in constructing and following (or at least attempting to follow) a monthly budget to save money.  But as strictly as consumers try to follow their budgetary guidelines, in today’s economy Americans are finding it increasingly difficult to maintain these spending limits with consumer price inflation — now at 5 percent as of July for urban consumers — raising the cost of goods and services.

To compensate for what seems to be the weekly increase in the cost of everything, consumers have shifted their financial habits signaling intentions to reduce monthly savings, cut back on outings to the movies or eating out, and putt off that planned vacation.  It’s really no wonder consumer confidence has fallen off a precipice over the last year.
 
But for those in the accounts receivable management industry, creditors and collection agencies alike, most concerning is the continued weakness of the job market.  June’s loss of 62,000 jobs was followed by July’s shedding of an additional 51,000 jobs, bringing the unemployment rate to 5.7 percent, a four year high (“Unemployment Rate Jumps to 5.7 Percent, Four-Year High,” Aug. 1).  Adequate job security or not, this news continues to affect consumers who evaluate what does and does not take priority when checks go out on the first of the month – directly impacting those servicing or collecting on delinquent accounts.

With this economic environment and corresponding consumer negativity it’s little wonder that the Kaulkin Ginsberg Index (KGI) – the leading indicator of economic conditions affecting the accounts receivable management (ARM) and debt management industries – continued its year-long descent.  In its most recent reading the KGI tumbled 8.0 percent year over year (“ARM Index Shows Continuing Erosion of Collection Environment,” May 30).

As more consumers find themselves hunting for a job or stumbling into part-time employment, the adverse effects of the increasingly weak job market will continue to impact the collection of bad debt.

Though the ARM industry is generally considered to be recession-resistant, no industry is recession-proof.

The question that remains to be answered: Just how deeply has the one-two combination of “price increases” and “rising unemployment” affected the bottom line of the ARM industry?  How deeply will these factors affect your bottom line? 

I’d love to hear our readers chime in and give us their perspective on the current operating environment.