Consumer Credit Heads Further South in July

September 10, 2009

This article is included in these additional categories:

Analytics, Automated & MarTech | Financial Services | Household Income | Retail & E-Commerce

Total US consumer, revolving and non-revolving credit rates all fell dramatically in July 2009, significantly outpacing the rates of decline set in June and Q209, according to the US Federal Reserve Board.

During July, consumer credit decreased at an annual rate of 10.4%, revolving credit decreased at an annual rate of 8%, and non-revolving credit decreased at an annual rate of 11.7%, reports Retailer Daily.

In contrast, consumer credit decreased at an annual rate of 5% during June 2009 , while revolving credit decreased at an annual rate of 0.2%, and non-revolving credit decreased at an annual rate of 0.6%. The quarterly rates of decline in these categories were 5.25%, 1%, and 1.2%, respectively.

In US dollars, total consumer credit fell from an adjusted $2.49 trillion to $2.47 trillion. Revolving credit, which mostly consists of credit card debt, fell from an adjusted $911.7 million to $905.6 million. Non-revolving credit, which consists of loans and financing, fell from an adjusted $1.58 trillion to $1.56 trillion.

According to the Federal Reserve, consumers are also reducing their borrowing. During June 2009, consumer borrowing fell about 20%, from $775 billion to $762 billion USD. During Q209, consumer borrowing fell about 16%, from $794 billion to $762 billion USD.

Considering how much of the mid-decade economic boom was supported by consumer credit and borrowing, the continuing decline of these figures does not bode well for retailers, or for the economy in general. In July 2009, consumers saw little change to their personal income or spending, but did decrease saving by 5.6%, which may indicate an increased willingness to shop at retailers. However, US retail and food services sales dropped 0.1% in July.

Further exacerbating the decline in consumer credit levels are reports that US credit card companies are reducing the number of credit cards being offered, and will cut credit-card lines and close accounts in the months to come in response to changes to consumer protection laws that make it more difficult for them to raise fees or interest rates.

Mintel Comperemedia reports that credit card companies are stepping up premium credit-card offers? to the wealthy, in an attempt to mine profitable customers who have good credit scores, high disposable incomes and patterns of big-spending. The overall number of card offers to the wealthy (premium and non-premium) has held steady, while the number of card offers to the general population has been steeply curtailed.

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