Smart Borrower Blog

Consumer Borrowing Slows, Credit Delinquencies Fall


Apr 7th, 2010 @ 1:51 PM by Amber Nelson


From the latest set of market data, it looks like the economy and the jobless rate are still making consumers wary of spending and using credit. The Federal Reserve reported that total consumer credit dropped in February by a seasonally adjusted $11.5 billion to an annual rate of $2.448 trillion. That represents the 12th decrease in 13 months and is a much worse decline than the median expected drop of $700 million by a Bloomberg survey of economists.

Revolving debt, including credit cards, fell by 13 percent on an annual basis, roughly by $9.4 billion, accounting for the largest decrease in three months. Yet even as borrowing slowed, fewer Americans were falling behind on their credit card payments. Five of the six biggest U.S. credit card lenders reported that their total number of late payments were either down or unchanged.

Non-revolving credit, including car, student, and personal loans, also declined, falling 1.6 percent ($2 billion) to $1.59 trillion in loans. Auto sales specifically were down, falling to 10.36 million in February from 10.8 million the month before.

So what’s keeping people from spending? In a CNN Money article, Wells Fargo economy analyst Yasmine Kamaruddin says:

“February’s decline reflects on the still dire state of the economy. 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.”

“I expect more declines, but smaller declines, as we progress throughout the recovery,” she said. “We’ll have to wait for employment prospects to improve and be sustained before consumers will feel confident enough to build up credit and purchase more.”

As of last week, the Labor Department shows that the nation’s unemployment rate has not changed from February to March, remaining at 9.7 percent, the highest rate since 1983.

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

One Response to “Consumer Borrowing Slows, Credit Delinquencies Fall”

  1. Credit Card says:

    The consumer loan delinquency rate is useful in predicting consumer spending on durable goods and retail sales, while various economic indicators are useful in predicting the ratio of consumer installment credit to disposable income. The results provide no evidence for the hypothesis that a rising consumer debt burden signals any slowdown in the growth of consumer spending and the economy. Instead, the results indicate that rising consumer indebtedness is a normal occurrence in an economic expansion.

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