Consumer deleveraging datapoint of the day
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Straight from the Fed:
Consumer credit decreased at an annual rate of 10-1/2 percent in July 2009. Revolving credit decreased at an annual rate of 8 percent, and nonrevolving credit decreased at an annual rate of 11-3/4 percent.
That’s huge, and it’s good news: individuals are clearly getting their fiscal houses in order. I am interested that nonrevolving credit is falling faster than revolving credit (ie credit cards): that might well be a function of the sharp drop in auto purchases, and will spike back up when people start buying cars again.
Total consumer credit is now $2,472 billion, down more than $100 billion, or 4%, from the $2,578 billion level seen in the third quarter of last year. Revolving credit is down more than 9% from its end-2008 level.
And get this: consumers aren’t just deleveraging, they’re also getting more sensible about where they’re borrowing. Look at the numbers for credit unions: total consumer credit extended from credit unions has now hit a new all-time high of $238 billion. No deleveraging there — even credit-union credit cards are being more used than ever.
With any luck, the US consumer’s new habits — of thinking hard about one’s financial situation and trying to minimize debt — will last long. Would that Corporate America thought the same way.
(Via Conaway)
Update: Jake has a very pretty chart.
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corporate borrowing has been reasonable. look at the amount of non-financial corporate debt outstanding between, say, 1980 and today. it’s basically unchanged as a % of gdp.
As this is the biggest drop in consumer debt since the heyday of Cole Porter, I’d like to offer a 58 second musical tribute entitled “We’re Deleveraging” to a tune by Mr. Porter.
http://www.youtube.com/watch?v=42kP-6xSf 70
Feel free to post, link, or pass the word.
Thanks,
Bill Dyszel
Nice video clip…where’s the requisite Jaguars or Mercedes & of course, requisite bling
People’s memories of this time are not going to fade easily. Those free spending, free caring days I think are gone, at least for the foreseeable future. What I hope will emerge from this recession is a more financial responsible public. People are going to be weary, and that’s not necessarily a bad thing. I think when we do finally emerge from this downturn, that we’re going to see people saving a lot more money than they did in the past. That to me is a good thing. The borrow, borrow, borrow, spend, spend, spend, lifestyle is not one made for long term success. Eventually the bottom is going to fall out of anything like built like that. My dream is that a more secure, financial responsible America will emerge and that will be a country that is built on a solid foundation. It’s only going to take time.
Check out my blog on the record cut in consumer debt at… http://www.thedebtgazette.com/2009/09/se t-record-for-cutting-debt-july/
not so fast. these stats can be mis-leading and not necessarily a good thing. first of all deleveraging can ultimately lead to a decrease in us growth. Secondly, non-revolving deleveraging can occur due to charge-off, foreclosure and bankruptcy on guess what mortgage loans.