Wednesday, October 8, 2008

August G.19 Report: Consumers Finally Take Foot Off The Credit Card Pedal

I was so busy yesterday that I forgot about the Federal Reserve's G.19 consumer credit release.

The Fed reported that "consumer credit decreased at an annual rate of 3-3/4 percent in August. Revolving credit decreased at an annual rate of 3/4 percent, and non-revolving credit decreased at an annual rate of 5-1/2 percent."

On a sequential basis (July to August), revolving credit (mostly credit cards) decreased slightly, down to $969 billion from $969.6 billion. In all, including non-revolving credit, consumer debt stood at $2.58 trillion, down from $2.59 trillion in July. Here is the full G.19 release: CONSUMER CREDIT AUGUST 2008 (link here).

The latest report indicates that consumers are finally beginning to ease off the credit-card pedal (consumer debt has been on an upward march for years; this is the first time since January 1998 that we've had a decline in this metric). Given the Federal Reserve's rate cut today (down 50 basis points), it will be interesting to see if consumers hit the acceleration pedal again during the coming months. With the holiday season fast approaching, it might be tough to ferret out the Fed's prodding and the holidays' lure, however.

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Anonymous said...

And the next question is: with consumers charging less what impact is that going to have on the overall economy? I think the hangover is going to be long (not to mention painful). said...

Anon, I was just discussing this with someone. This is not going to bode well for the holiday shopping season. These are August numbers; I can only imagine what Sept. looked like. And it's anyone's guess as to what the Nov. and Dec. figures will look like.

Looks like the spigot has finally been shut off.

Anonymous said...

Perhaps this is a sign that the US consumer attitude will shift to be more like post-recession Japan (10.7% vs US 4.7%).

American memories are very short however - I bet within a year of things calming down on wall street we will be back to spend spend spend. said...

We learned nothing from the stock market bubble at the turn of this century. We rolled right into a housing bubble. We always find something to roll into.

Our memories are short indeed.

Sean said...

Just curious...did people really cut back & start paying down debt or are we seeing the results of banks charging off/selling debt to collectors? said...

Sean, it's impossible to know. It could be that banks have started cutting people off as well. The only thing we know for sure is that credit usage shrunk in the most recent period.

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