Consumer Credit Contracts from January Bounce

Been on the road away from it all this morning / early afternoon. It looks like I missed an interesting day of news. CNN Money details one of those pieces of information:

Consumer borrowing dropped in February, after increasing for the first time in a year during the previous month, according to a government report released Wednesday.

Total consumer credit fell a seasonally adjusted $11.5 billion, at an annual rate of 5.6%, to $2.448 trillion in February, the Federal Reserve reported.

Economists predicted a decline in total borrowing of $0.7 billion in February, according to a consensus estimate from Briefing.com.

"February's decline reflects on the still dire state of the economy," said Yasmine Kamaruddin, an economic analyst at Wells Fargo.

"Even if we have seen retail sales and personal expenditure increase in past months, we haven't seen these gains translate into the use of credit because consumers faced with unemployment and slow wage and salary growth are still shying away from taking on credit," she added.

Can't agree completely with Ms. Kamaruddin, as we detailed at EconomPic the paying down of debt outstanding is actually declining in the consumer sector (it's just that defaults are outpacing paydowns that has caused the level to shrink).



Source: Federal Reserve / BEA