Quoted – Consumer credit unexpectedly declines to 3-month low

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Consumer credit unexpectedly declines to 3-month low

Borrowing by U.S. consumers decreased in February, more than economists anticipated, a sign consumers are still reluctant to take on debt without continued improvement in the job market.

Consumer credit, encompassing credit card debt and non-revolving loans, decreased $11.5 billion, or 5.5 percent at an annual rate, the Federal Reserve said Wednesday.  Economists polled by Bloomberg LP estimated a decrease of only $700 million.

The February measure is just another indication that consumer spending, which accounts for roughly 70 percent of economic activity, will continue to stay put until households begin to feel more optimistic about the labor market.

Scott Testa, professor of business administration at Cabrini College in Philadelphia, Pa., said that despite the encouraging news on the job front, job security is still hampering consumer spending. “People are much more frugal when they know they are going to lose their jobs, or they are already out of work,” said Testa, who pointed to the importance of credit to the success of the U.S. economy. “We are a nation of credit cards, we love buying,” said Testa. “Unfortunately that puts us in a position where we have high debt levels.”

http://news.medill.northwestern.edu/chicago/news.aspx?id=162693

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Quoted – Consumer credit contracts at slower pace – Medill Reports

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Consumer credit contracts at slower pace

December’s consumer credit figure, released by the Federal Reserve Board Friday, declined by $1.8 billion to $2.46 trillion from about $2.47 trillion in November, a drop of 0.07 percent. This follows a 0.5 percent drop of $13.8 billion in October. The drop in December was well under the $10 billion contraction estimated by economists in a survey by Bloomberg LP.

“I think things are starting to loosen,” said business professor Scott Testa about the nation’s overall credit market. But Testa, of Pennsylvania’s Cabrini College, cautioned that an improvement of credit would be slow.

“It’s not stuff that happens overnight,” he said.

Revolving credit, which includes credit card financing, continued to slide, falling another $8.5 billion to $866 billion from $875 billion in November, a drop of almost 1 percent. This follows a 1.6 percent drop of $13.8 billion from October.

“It’s all about the jobs,” Testa said of the drop, emphasizing that the figure reflects the weak job market, consumer spending and the remaining but decreased fear banks have about lending.

“It’s an indication that banks are nervous about extending credit,” he said.

http://news.medill.northwestern.edu/chicago/news.aspx?id=155826

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