“Consumer Credit in U.S. Fell $3.6 Billion in July” |
| Consumer Credit in U.S. Fell $3.6 Billion in July Posted: 08 Sep 2010 02:26 PM PDT September 08, 2010, 5:03 PM EDT By Vincent Del Giudice (Updates with economist's comment in fourth paragraph.) Sept. 8 (Bloomberg) -- Consumer borrowing in the U.S. declined for a sixth straight month in July, indicating Americans are reluctant to take on more debt without faster job growth. The $3.6 billion decrease followed a revised $1 billion drop in June that was less than initially estimated, the Federal Reserve said today in Washington. Economists projected a $4.7 billion decline in the July measure of credit card debt and non- revolving loans, according to the median forecast in a Bloomberg News survey. Borrowing that's increased twice since the end of 2008 shows consumer spending, which accounts for about 70 percent of the economy, will be restrained as people pay down debt. Confidence to charge more or take out loans may be restored when the economy picks up and companies ramp up hiring. "The outlook for consumer spending is a guarded one," said Chris Rupkey, chief financial economist at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. "The good news is that consumers are deleveraging and paying down their debts." Consumer spending "appeared to increase on balance," though shoppers were limiting purchases of non-essential items, the U.S. central bank said earlier in its Beige Book survey by the 12 regional Fed banks. Economists projected July consumer credit would drop from a previously reported $1.3 billion decrease in June, according to the median of 36 economists in the Bloomberg survey. Estimates ranged from a $7 billion slump to no change. Stocks Rise Stocks rose, sending the Standard & Poor's 500 Index higher for the fifth day in six, as concern eased that Europe's sovereign debt crisis will derail the global recovery. The S&P 500 gained 0.6 percent to 1,098.9 at the 4 p.m. close in New York. Revolving debt, which includes credit cards, declined $4.4 billion in July, according to the Fed. Non-revolving debt, including loans for cars and mobile homes, rose $758 million for the month, the third straight gain. The report doesn't track debt secured by real estate, such as home equity lines of credit. Auto sales in the U.S. rose to an 11.56 million annual pace in July from 11.17 million a month earlier, according to industry statistics. Toyota Motor Corp., the world's largest automaker, and Nissan Motor Co. were the only major carmakers to exceed analysts' estimates in July. Nissan's total sales gained 15 percent compared with analysts' average estimate for a 6.8 percent increase. 'Good in July' "It seems the news has turned more negative on the economy, but our floor traffic was really good in July," said Al Castignetti, vice president of the Nissan's U.S. sales unit. "The people who were coming in to our dealerships were buyers." Credit-card write-offs fell below 10 percent in July for the first time in more than a year, adding to signs that the industry's losses have peaked, Moody's Investors Service said in a report Aug. 25. The top six U.S. credit-card issuers, including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., all reported lower write-offs and delinquencies for July, according to regulatory filings. "The economic recovery that began last year is beginning to be reflected in the rising earnings and improving credit quality," Sheila Bair, chairman of the Federal Deposit Insurance Corp. said at a briefing last week. Federal Reserve After their Aug. 10 meeting, Fed policy makers said in a statement that Americans' "spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit." Retailers in the U.S. reported July sales gains that missed analysts' estimates as consumers cut spending before the back- to-school shopping season. Sales at 30 chains rose 3 percent, less than the 3.2 percent average of analyst projections, Retail Metrics Inc. said Aug. 5. Saks Inc., the New York-based luxury retail chain, last month reported a loss for the second quarter ended July 31 and said it will remain "cautious" for the second half of 2010 even as it plans to make investments including new stores. "It's a fragile environment," Stephen Sadove, chief executive officer, said in a Bloomberg Television interview on Aug. 18. "The consumer is still skittish. They're very much focused on value." Jobs and Recession The economy lost 8.4 million jobs in the recession that started in December 2007, and the unemployment rate remains close to the 26-year-high of 10.1 percent reported last October, according to Labor Department statistics. Home sales and construction remain near recession lows after the end of a government tax credit for purchases, according to data from the real estate industry and the government. Foreclosures have also pushed down prices. --With assistance from Peter Eichenbaum and Matt Townsend in New York and Phil Mattingly in Washington. Editors: Vince Golle, Christine Spolar To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net This entry passed through the Full-Text RSS service — if this is your content and you're reading it on someone else's site, please read our FAQ page at fivefilters.org/content-only/faq.php |
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