Wednesday, October 7, 2009

Consumer Deleveraging Continues...This Train Ain't Stopping Anytime Soon

Data released by the Fed today showed that consumer deleveraging continued in August, with seasonally adjusted consumer credit outstanding contracting by $12 billion. This would be the seventh straight month of decline since January 2009. The Consumer Credit number which represents all short to intermediate term borrowings such a credit cards, auto loans and education loans (excluding mortgage debt), has contracted by $113 billion since the crisis hit in August 2008.
According to a CNN Money report by Hibah Yousuf :
Consumer credit pulled back in August, led by a steep decline in credit card usage, a government report said Wednesday, as unemployment soared and cash-strapped consumers continued to limit spending. The total amount of credit outstanding fell by $12 billion, or a 5.8% annual rate, to $2.463 trillion in August, according to the Federal Reserve.
"Credit is being squeezed on both sides," said economist Sean Maher of Moody's, adding that lending standards at banks remain tight and consumers are pulling back on their debt. "But at the same time, unemployment is rising and people are weary of using credit cards as a stopgap measure," Maher said. "If they don't think they can find another job quickly, they won't run up a debt burden and pay interest on it."
Looks like the Grinch will definitely be stealing Christmas this year...and the next 10 years.

No comments: