Montreal, Canada

After a brief improvement in July, U.S. credit card issuers reported a rise in those borrowers requiring more time to pay their balances in August. Capital One, J.P. Morgan Chase, Bank of America, Citigroup, Discover Financial Services and AMEX all reported charge-offs increased in the latest period under review.

“Charge-offs,” or credit card loans deemed uncollectible continue to rise in 2009. As the unemployment rate has surged to a 26-year high recently, more consumers are relying on plastic to finance their daily living expenses and in some cases, requiring more time to make hefty minimum payments.

Bank of America has the highest write-off rate in the United States with credit card customers in August writing-off 14.54% of card loans in August, up from 13.81% in July. The trend is the same across the board for other issuers.

Retail sales, which gained 1.1% in August -- even after excluding the one-time “cash for clunkers” program -- is probably just a short-term blip in the wider trend affecting domestic consumption. Surging stock prices and impending evidence of a bottom in residential housing might have attributed to the “feel good” factor boosting retail sales last month.

But the primary trend since last fall remains bearish with most consumers scaling down from the likes of Wal-Mart and heading to Dollar stores as pay-checks shrink or disappear altogether. The number of Americans using food stamps is now the highest in more than 25 years.

As for the rise in new and existing home sales, the big picture isn’t always what it appears to be.

Foreclosures are about 1/3 of all existing home sales this year – included in the existing home sales data. And worse, federal government agencies like FHA, Fannie and Freddie are responsible for more than 80% of mortgage originations in the United States in 2009; without government support the mortgage lending market would be almost non-existent.

To be sure, several signs of a bottom have appeared since June, including manufacturing data, the PMI Index, house prices, auto sales and even declining unemployment claims. Yet to be truly out of the woods I would caution that short-term improvements are not necessarily evidence of a bigger trend pertaining to recovery; until we see a gain in year-over-year data for housing, employment, consumption, auto sales and especially, bank credit – the economy remains heavily impaired.

The stock market has come too far, too fast. Things might not be as bad as they were back in March but they sure aren’t booming, either. Sobering third quarter earnings should trigger the much-needed correction after months of nonstop gains for the stock market.

Have a good weekend. See you on Monday.