If our calendar and math are correct, the data from the Fed just released on consumer credit in August shows that the rate of borrowing has come down to levels not seen in 10 years. Consumer credit fell by some $7.9 billion down to $2.577 trillion. That was following a $5.2 billion rise in July. Economists were looking for an increase of $5 billion or more for the month of August. As a reminder, consumer credit data excludes home mortgages and other real estate-secured loans.
This might not be good for growth in the retail and consumer spendingsectors. But the world is de-leveraging rapidly. Main Street isde-leveraging just like Wall Street. With the comments from Bank ofAmerica yesterday showing how fast credit quality and conditions aredeteriorating, it may set the tone that credit will continue itscontraction ahead.
Jon C. Ogg
October 7, 2008