Consumer Credit Down for 11th Consecutive Month

Friday, February 05, 2010 , , 5 Comments

Business Week:

Consumer borrowing in the U.S. declined less than anticipated in December as Americans took out loans to buy cars.

The series of declines is the longest on record and indicates consumer spending, which accounts for about 70 percent of the economy, will be restrained with Americans reluctant to take on more debt until hiring picks up. A separate government report today showed the unemployment rate unexpectedly dropped to 9.7 percent last month.

“Consumers have been reducing their debts and are not borrowing to finance spending like they did before the recession,” said Gary Thayer, macro strategist at Wells Fargo Advisors LLC in St. Louis. “Banks are lending, but they are being more cautious and they are having to write off a lot more consumer loans.”

OK, and? What have we here? More revisions? Yay!

The Fed’s figures track credit card debt and non-revolving loans, such as those to buy autos. The December decrease in credit was the smallest since a gain in January 2009. The Fed initially reported that consumer credit plunged $17.5 billion in November. Revolving debt, such as credit cards, fell by $8.5 billion in December, according to the Fed’s statistics. Revolving credit has decreased 15 straight months, the longest series of declines since the Fed began keeping those records in 1968.

Non-revolving debt, including auto loans and mobile-home loans, rose by $6.8 billion as car sales increased during the month. The Fed’s report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. increased in December to a seasonally adjusted annual rate of 11.23 million, the strongest since 14.09 million in August, when Americans took advantage of government incentives. The pace slowed last month, to 10.8 million.

Stop for a second. Am I absolutely insane to question this math? I don't see new cars on the road. I know most of my friends are unemployed and have all but given up on finding a job. I know small business owners I talk to still don't have access to loans. So who the hell are these consumers and where the hell are these loans/vehicles/jobs coming from?

Perhaps it is just that I am stuck here in San Francisco where a studio apartment runs you $1500 and a nice dinner for two can easily set you back $200 and therefore I am not seeing the "big picture" - anyone from the grassy tundra of the Midwest care to weigh in on my perceptions? NY? LA? Chicago? Somehow I get the sneaking suspicion I am not nearly as insane as I appear at first glance.

Still not buying it. But you're welcome to go jerk off over the Fed's G.19 via the Board of Governors here.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.


OldSouth said...

No, you are not alone. I see a few new cars on the road here in Middle Tennessee, mainly in the 'silk stocking' neighborhoods. The mainstay of life here in my county is the F-150 pickup, and I've spotted no new ones in the past few months.

I look for them, as I have a running case of 'truck envy'.

The Chrysler dealership here is now shuttered. I drive by the the large multi-brand dealership out by the interstate, and all the inventory is there, parked in the same order, day after day--including some of the left-over inventory from the Chrysler dealership down the road toward town!

I travel through a good bit of the heartland, and it's about the same.

The dealerships in Joliet, Illinois park the inventory at odd angles, to give the appearance that they have more inventory than they actually possess.

Even in the tonier parts, where there are some new cars, no one seems to be buying 'flash' cars. Sensible cars, bought for utility and longevity. Minivans to haul kids, sedans to haul adults. My newly-married brother-in-law purchased a new Suzuki compact four-wheel drive item so the wife can tootle around their side of town even if it snows. Low bucks, low risk, no flash.

Our house has three paid-for cars, bought for cash, and I'd rather pay my mechanic to maintain them than send money to any bank to purchase one.

Besides, the local bank runs a repo auction monthly. Very nice vehicles at very nice prices. If need be, I can shop there.

Anonymous said...

Christmas is in December. I think the only way to get any real bearing on what is going on is to measure and chart year over year for the past 10 Decembers and then you would start to have a very clear "big picture" of how credit/future money is leaving the marketplace. Sales are way down on new vehicles compared to 2002-2005.

Lots of tax breaks expired in December where it came to new autos and there was an uptick in activity - nothing to write home about but it was an uptick. Now, we are back to mostly crickets.

I got a happy surprise tax credit for 2009 for the sales taxes paid on the new motorcycle I bought to replace a wrecked one in May 2009-thanks Obama! The AMA pushed to have the credit extended to motorcycles and they said "what the hell - in for a penny, in for a pound". Hey I figured I helped keep some dudes in Spirit Lake, Iowa employed and I don't catch too many breaks with Uncle Sam so I was due.

Fly over country always has been a cheaper place to live. Housing, food, gas, the whole sha-bang. Some of the high prices in other places are covering legacy costs - I suspect that's why they say that housing prices can explode going up but are very "sticky" coming down. People trying to sell are under a rock with what they owe. Taxes and expectations don't come down overnight. City/State budgets are built around unrealistic expectations.

The new autos being bought around St. Louis are on the smaller side now. For a while, they were c-r-a-z-y mad about big SUV's and pickups but around town, there are far more Hondas, Toyotas, Suzukis, Nissans than there were 20 years ago when I moved here. Some people here will always drive SUV's no matter what. No why the BIG 3 were so reluctant to stop building them even when gas started going way up in price? The demographic that they were selling to for that vehicle - middle aged, married with kids, my lawn is greener than yours Larry so suck it, soccer in the Spring and Disneyland in the Summer crowd - has a bit of a weight problem (no shit Sherlock). Even though they were reluctant to admit to it, many of those buyers would not consider smaller automobiles that made better economic sense because they had trouble getting their lard asses in and out of a smaller automobile that was lower to the ground. That they have that problem is one thing but that they would hem and haw about it was what I found so funny.


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kliguy38 said...

Don't sweat you hot pants kid.....this statistical ping pong will be maintained until the titanic goes under the water....then and only then can you believe the CONfidence is over. your pal kliguy38

David said...

This is bigger than what happened the past year. We are paying down decades of debt, and not inclined to pile more on top of it. The government has stepped in to do that. By the way, has anyone talked about the "crowding out" effect lately? Since 2001, even?