Wednesday, December 07, 2005

 

Record Drop In Consumer Credit

Bloomberg has the latest on the US consumer. "Borrowing by U.S. consumers unexpectedly fell in October as plunging auto sales reduced demand for financing, a Federal Reserve report showed today. Consumer credit, or non-mortgage loans to individuals, decreased by a record $7.2 billion to $2.16 trillion."

"Financing for new automobile purchases provided less support to consumer credit in October, as U.S. vehicle sales declined to a seven-year-low of 14.7 million units on an annualized basis."

"Consumer credit had been expected to rise by $5 billion in October. General Motors Corp. and Ford Motor Co., the two biggest U.S. automakers, said their vehicle sales fell 26 percent in October from the same period a year ago. New guidelines requiring higher minimum monthly payments on credit cards may have contributed to the October decrease in consumer debt, according to John Silvia, chief economist at Wachovia Corp."

"The Fed is encouraging banks to raise minimum monthly credit-card payments to about 4 percent of the outstanding balance from 2 percent. 'People have adjusted faster than we expected to the way they use credit,' Silvia said before the report. 'This could be a signal that Christmas sales may be weaker than expected.'"

"Higher mortgage rates in October also made it more expensive for consumers to support their spending patterns by tapping the equity in their homes. The average fixed rate on a 30-year home mortgage was 6.08 percent, compared with 5.79 percent in September and 5.66 percent in October 2004, according to the MBA. The average number of weekly mortgage refinancing applications declined 11.4 percent in October from the prior month."

Comments:
'This could be a signal that Christmas sales may be weaker than expected.'"

The true meaning of Christmas was lost long ago. If sales are slow it will be blamed on the consumer. Who may one day stop buying things they don't need with money they don't have...
 
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