Consumer debt shrinks for the first time in 10 years
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Did they jump -- or were they pushed?
U.S. consumer credit outstanding fell in August, marking the first monthly decline in a decade, the Federal Reserve said today.
Total non-mortgage consumer credit slid for the month at a 3.7% annualized rate, to $2.58 trillion seasonally adjusted, the Fed reported.
Before this, the last time consumer credit shrank was in January 1998.
Some Americans undoubtedly are making the decision to reduce personal debt, which is healthy in the long run. But for others, banks are making the decision for them by rejecting loan requests or slashing credit lines.
As Federal Reserve Chairman Ben S. Bernanke noted in a speech today:
Even households with good credit histories are now facing difficulties obtaining mortgage loans or home equity lines of credit. Banks are also reducing credit card limits, and denial rates on automobile loan applications reportedly are rising. Businesses too are confronting diminished access to credit.
All of this bodes poorly for consumer spending, of course -- particularly in the case of big-ticket goods.
Today, amid the broad market rout, shares of General Motors Corp. fell to a new 54-year low, down 92 cents, or 10.8%, to $7.56. And Ford Motor Co. is nearing penny-stock status: It closed today at a 25-year low of $2.92 after plummeting 77 cents, or 21%.