Monday, August 10, 2009

Consumer Credit Down Sharply

Another strike for consumers (they may WANT to spend, but with job losses, wealth destroyed, and the inability to spend with borrowed money, they may not be able to do so). Money CNN with the details:

Consumer credit fell in June for the fifth straight month, as widespread unemployment curbed spending, a government report said Friday.

Total consumer borrowing sank a seasonally adjusted $10.3 billion, or 4.9%, to $2.503 trillion, according to the Federal Reserve. The report measures how much debt consumers have outstanding.

The reduced borrowing comes as the economy sheds jobs by the thousands, and mass layoffs and pay cuts have limited consumer spending power. At the same time, banks have tightened lending standards due to growing concerns about default risk.

Consumer credit began contracting last August, the first decline since January 1998. It rebounded in September before contracting again and fell for three consecutive months to close out 2008.



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7 comments:

  1. bkAugust 10, 2009 at 9:25 AM

    Hey Jake,

    I've been toying around with the Flow of Funds data as well recently.

    Though it's fairly straight forward to calculated some info from this data, I wanted to take things a step further: Total Net Worth of US (just like an individual or business would find out their net worth).

    Specifically -- if you add in all assets of households, business, gov't (real estate, property plant & equip, stock & mf holdings, inventories, cash/mm accounts, etc.) and subtract the liabilities for these three groups (mortgages, heloc, cc debt, outstanding debt, student loans, etc.) -- what would that final # be?

    I think its a bit too simplistic to look at just Total Debt as a % of GDP. The other side of the balance sheet needs to be considered as well.

    If you have any insight on what specific data w/in the Fed FoF to look at, I would greatly appreciate the pointer.


    Thanks for the great blog!

    Bryan

    ReplyDelete
  2. JakeAugust 10, 2009 at 10:52 AM

    so debt as a percent of total "country" worth if you will.

    that would be mighty interesting. let me see what i can dig up...

    ReplyDelete
  3. Bryan KellerAugust 10, 2009 at 11:46 AM

    Here's what I've been able to find, but the data in the aggregate doesn't pass the smell test to me.

    Link to Z1 data:
    http://www.federalreserve.gov/datadownload/Choose.aspx?rel=Z1

    Gov't net worth: Series L. 106 (rows 2,21)
    Business net worth: Series R. 103 (row 22)
    Household net worth: Series R. 100 (row 20)

    I've pulled together all of the data in a spreadsheet -- would be more than willing to pass it along to you.

    Bryan
    bryanpkeller@gmail.com

    ReplyDelete
  4. AnonymousAugust 10, 2009 at 2:15 PM

    SAVE! BABY! SAVE! ;)

    ReplyDelete
  5. AnonymousAugust 10, 2009 at 4:10 PM

    It is .49% not 4.9%. The fed has math problems.

    ReplyDelete
  6. JakeAugust 10, 2009 at 7:42 PM

    the 4.9% is the annualized change...

    ReplyDelete
  7. AnonymousAugust 10, 2009 at 9:40 PM

    Paul Tudor was mentioning this rececently aswell.

    ReplyDelete