July Consumer Credit

July Consumer Credit fell a much bigger than expected $21.6b vs the consensus of a drop of $4b to a total of $2.47t outstanding. June was also revised lower to a decline of $15.5b from the initial reading of a fall of $10.3b. Both revolving (mostly credit cards) and non revolving (mostly auto’s) credit balances were lower and the overall amount outstanding has now fallen 9 out of the past 10 months. Because the clunker auto program began in late July, this data likely doesn’t reflect the influence on non revolving credit outstanding. Rising unemployment, cut/reduced credit lines, consumer savings and less spending are all the influences on the consumer credit data and the reduction is a secular, long term trend which impacts economic activity in the short term but the extinguishment of debt is what our country desperately needs for the benefit of the long term.

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