Help The Middle ClassNews and Information For The Heart Of America
Middle Class Continues To Cut Back On Borrowing (Wall Street Journal)
U.S. households shed debt for the ninth straight month in October, but at a slower rate, reflecting still-tight lending conditions and waning demand for loans.
The amount of consumer credit outstanding, which includes most consumer loans except real estate, declined by $3.5 billion, or at a seasonally adjusted 1.7% annual rate, to $2.48 trillion in October, the Federal Reserve said Monday.
Revisions to previous months showed that consumer credit has actually declined less than previously reported. For the third quarter, it decreased at a revised 3.3% annual rate as opposed to the 6.1% decline the Fed originally estimated.
Still, the continuing declines are the latest signal that, despite economic improvements, consumers are constrained by tight credit conditions and have a reduced appetite for borrowing. The combination is likely to contribute to a modest recovery because consumer spending makes up about 70% of gross domestic product.
“Despite the general improvement in financial conditions, credit remains tight for many borrowers, particularly bank-dependent borrowers such as households and small businesses,” Federal Reserve Chairman Ben Bernanke said in a speech Monday in Washington, D.C. “Household spending is unlikely to grow rapidly when people remain worried about job security and have limited access to credit.”
Revolving credit, primarily made up of credit-card borrowing, fell at a 9.3% annual rate in October and a 7.3% annual rate for the third quarter. Banks have continued to tighten credit-card standards: The Fed’s October Senior Loan Officer Opinion Survey found that 34% of banks said they decreased lines of credit for existing credit-card customers. None of the banks reported increasing them.
FOR CONTINUATION OF THIS STORY, CLICK THIS LINK FOR THE WALL STREET JOURNAL: Consumers Continue to Cut Back on Borrowing – WSJ.com.
