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 Posted: Fri Nov 06, 2009 2:06 pm |
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demand drives a modern economy, demand is wage driven, wages after
adjusting for inflation are at about 1973 levels, demand is plummeting
driving deflation:Consumer borrowing drops by $14.8 billion in
September, record 8th straight decline
http://finance.yahoo.com/news/Consumer-borrowing-drops-148B-apf-3777546440.html?x=0
Consumer borrowing drops $14.8B in September
Consumer borrowing drops by $14.8 billion in September, record 8th
straight decline
• By Martin Crutsinger, AP Economics Writer
• On 3:59 pm EST, Friday November 6, 2009
WASHINGTON (AP) -- Consumers borrowed less for a record eighth
straight month in September amid rising unemployment and tight credit
conditions. Economists worry the declines in borrowing will drag on
the fledgling recovery.
The Federal Reserve said Friday that borrowing fell at an annual rate
of $14.8 billion in September. That's the biggest decline since July
and was larger than the $10 billion drop economists expected.
Americans are borrowing less as they try to repair cracked nest eggs
and replenish rainy day funds in a dismal jobs market. Many are
finding it hard to get credit as banks, hit by the worst financial
crisis in decades, have tightened lending standards.
Borrowing by consumers for revolving credit, including credit cards,
fell at an annual rate of 13.3 percent in September, the same as
August. This category has declined for a record 12 straight months.
Borrowing for non-revolving loans, including auto loans, dropped at an
annual rate of 3.7 percent in September after edging up 0.1 percent in
August. The August gain reflected the surge in car sales as consumers
rushed to take advantage of the government's Cash for Clunkers
program.
The $14.8 billion overall decline in borrowing left total consumer
credit at $2.46 trillion in September. The 7.2 percent annual rate of
decline followed a 4.8 percent drop in August. The Fed's report
doesn't include mortgages or other loans secured by real estate.
While economists have worried for years about the low rate of U.S.
savings, the concern is that consumers could derail the recovery if
they begin socking away too much of their incomes. Consumer spending
accounts for 70 percent of total economic activity.
The government reported last week that the overall economy grew at an
annual rate of 3.5 percent in the July-September quarter, the first
growth after a record four straight declines and the strongest signal
yet that the recession has ended.
Some worry that growth will sag in coming quarters partly because the
nation's unemployment rate keeps rising. It climbed to 10.2 percent in
October, the Labor Department reported Friday, the first time above 10
percent since 1983. Many economists believe the jobless rate will rise
further in coming months.
But there some positive signs this week that consumer spending may not
weaken as much as had been feared. The nation's automakers reported
that total sales of cars and light trucks rose 12 percent in October
from a dismal September, a month when sales plunged because the
clunkers program ended in August.
Also, the nation's big retail chains reported that consumers spent a
bit more last month. Sales rose 2.1 percent compared with sales at the
same stores in October 2008, according to a tally by International
Council of Shopping Centers-Goldman Sachs. That was the best year-over-
year result since July 2008 and beat estimates of a 1 percent gain.
Among stores doing well were: Costco Wholesale Corp.; TJX Cos., which
operates T.J. Maxx and Marshalls, and Gap Inc. Sales also improved at
luxury retailers like Saks Inc. and Nordstrom Inc.
The eight consecutive declines in consumer credit is the longest
stretch on records dating to 1943. The previous record of seven
straight drops from June through December 1991, also occurred when the
country was struggling to emerge from a recession. |
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