Yesterday in Job Creation Down 35%, Consumer Spending Down 33% From Year Ago I noted consumers are spending less because they have to. In many instances it is a forced attitude adjustment because debt levels are too high, and ability to service that debt decreasing.
Today, economists were shocked to find U.S. Consumer Credit Falls by a Record $21.6 Billion.
U.S. consumer credit plunged more than five times as much as forecast in July as banks restricted lending terms and job losses made Americans reluctant to borrow.
Consumer credit fell by a record $21.6 billion, or 10 percent at an annual rate, to $2.5 trillion, according to a Federal Reserve report released today in Washington. Credit dropped by $15.5 billion in June, more than previously estimated. Credit fell for a sixth month, the longest series of declines since 1991.
The arrival of the government’s “cash for clunkers” program in late July wasn’t enough to keep credit that covers car loans from plummeting by a record amount, as consumers delayed other purchases.
Economists had forecast consumer credit would drop $4 billion in July, according to the median of 31 estimates in a Bloomberg News survey.
Flashback May 8, 2009: Consumer Credit Plunges Record $11.1 Billion.
U.S. consumer borrowing fell more than expected in March, plunging a record $11.1 billion, a Federal Reserve report showed Thursday.
March consumer credit fell at an annual rate of 5.2% to a total of $2.55 trillion. This was the biggest percentage drop since December 1990.
Today, consumer credit contracted at a pace that is shockingly twice as bad as March, even though the March contraction was the biggest drop since 1990.
Frugality Reality Hits Mainstream Media
Only now is much of mainstream media catching up with “frugality” as a buzzword. Here are some things I have written about starting well over a year ago.
- March 23, 2008: A New Phenomenon: Haggling Over Prices
- April 24, 2008: Cool to Be Frugal
- August 10, 2008: The Future Is Frugality
- August 26, 2008: Frugality Is The New Reality At Citigroup
- October 19, 2008: The Age Of Frugality
- July 22, 2009: For One-Third of US, Frugality is the “New Normal”
Looking ahead, Christmas season is likely to be miserable with poor sales, poor margins, more store closings, and more bankruptcies. Consumers are increasingly going to be asking “Do I really need this” as well as “Can I really afford this?” Increasingly, the answer is going to be no.
Mike “Mish” Shedlock
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