Consumer Credit Falling Fast



Aside from what Bloomberg reported (below, bold/italics mine), the year-on-year change in consumer credit outstanding has been negative for five straight months, and has just reached its lowest level — i.e., the fastest pace of deleveraging — since World War II.

2,581.41 4.9%
8/31/08 2,574.94 3.9%
9/30/08 2,579.20 3.5%
10/31/08 2,574.76 2.9%
11/30/08 2,565.45 2.1%
12/31/08 2,558.63 1.6%
1/31/09 2,562.80 1.5%
2/28/09 2,551.40 0.6%
3/31/09 2,535.30 -0.5%
4/30/09 2,518.00 -1.6%
5/31/09 2,509.20 -2.2%
6/30/09 2,493.60 -3.1%
7/31/09 2,472.10 -4.2%


Given the above,what might this mean in terms of Consumer Spending? Is it deleveraging or job losses — or both? — that is having the biggest impact on “back to school sales?”

Here’s Bloomberg:


Wire: BLOOMBERG News (BN) Date: Sep 8 2009 15:00:01
U.S. Consumer Credit Fell by a Record $21.6 Billion in July
By Vincent Del Giudice

Sept. 8 (Bloomberg) — U.S. consumer credit plunged more than five times as much as forecast in July as banks maintained more restrictive lending terms and job losses made households reluctant to borrow.

Consumer credit fell by a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released today in Washington. Credit dropped by $15.5 billion in June, more than previously estimated. Credit fell for a sixth month, the longest series of declines since 1991. (emphasis added)

Rising unemployment, stagnant incomes and shrinking household wealth are casting doubt on the strength of the economic recovery. The category of credit that covers car loans also plummeted by a record amount, even as the “cash for clunkers” auto trade-in program helped push up personal spending in July.

“Consumer credit is being rationed severely and this is one factor that argues for a slow recovery from this biggest recession since the Great Depression,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report. Meanwhile, he said, consumers are “getting hit from both sides and they are desperately trying to get their credit-card debts under control.”

Economists had forecast consumer credit would drop $4 billion in July, according to the median of 31 estimates in a Bloomberg News survey. Projections ranged from declines of $12 billion to no change from the previous month. The Fed initially said consumer credit decreased by $10.3 billion in June.

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