|
||||||||||
American consumers continued to borrow less on their credit cards in December, according to a recently released report from the Federal Reserve. Revolving credit, which is largely a measure of credit card borrowing, fell by $8.5 billion, less than the record $17.5 billion drop in November, but still a considerable pull-back.
The decline marks the 15th straight month in which consumers have been pulling back on credit card borrowing, a record decline since the Fed first began keeping records. The continuing decrease indicates that consumers remain all too wary of taking on debt in the face of high unemployment rates and the continuing weak economy.
While consumers remain cautious about taking on credit card debt, however, borrowing on other types of consumer loans, including car loans and mobile home loans, increased in December by $6.9 billion. In addition, while total borrowing fell by $1.73 billion, December’s decline in total borrowing was much less than the $9 billion decrease predicted by most analysts, and a far cry from the record $21.8 billion drop in November. Before the current series of declines set in in August of 2008, total borrowing had not decreased for more than a decade. The Fed report doesn’t include data on mortgage lending.
Consumer spending makes up about 70 percent of the economy, and a return of consumer confidence is generally considered essential for economic recovery. Consumers have held back on purchases and other expenditures in the face of high unemployment rates, falling house values and still rising home foreclosures, which may reach a record 3 million this year compared with 2.82 million last year, according to RealtyTrac Inc.
The Fed’s quarterly survey of senior loan officers released in early February also showed that demand for business and consumer loans continued to weaken over the last three months of 2009. In addition, even though banks are easing the pull-back in credit, lending standards remain tighter than normal.
Still, the rebound in car loans and mobile home borrowing could be an early sign that consumers may be getting ready to resume spending. Credit card companies, for one, appear to think that consumers are getting ready to shed their credit card malaise. Over the last three months of 2009, card issuers dramatically increased the number of mailed credit card offers, which jumped by 47 percent compared to the previous three months.
