US Consumer credit shows a sharp decline in May
The market post recession has been recovering but is still sluggish and U.S. consumer credit has been dropping sharply indicating that customers are wary to borrow considering the uncertainty about the prospects economically.
According to the report the decrease as projected by economists is 2.3 billion dollars but in may the consumer borrowing dropped by 9.1 billion dollars much over the projected amounts.
April’s figure has been revised following this observation by the federal authorities. They are expecting the slump to be by about 14.9 billion dollars rather than the initial expected increase of 1 billion dollars. This clearly indicates that things are quite below the expected and projected numbers.
Consumer borrowing has been dipping over the last 16 months with no sign of improvement except towards the last month as households are struggling to refigure their battered balance sheets. This clearly shows that consumers remain reluctant to borrow or step out when the unemployment rates are still high and economic recovery is still unpredictable.
Consumers could be concerned about rising debts and also struggling to make their payments with the resources available and hence are reluctant to splurge or spend as they used to. Without stable jobs they would not consider it wise to have more financial commitments, rather they are trying to close the existing ones.
The report indicates credit cards which are a big part of revolving debt has dropped in may by 7.3 billion dollars a huge number and non revolving debt fell by about 1.8 billion dollars during this same time frame. The non revolving debt constitutes loans for cars and mobile homes among other factors.
Economists worry that this drop in consumer borrowing which is a sign of consumer spending being low could affect or possibly, even create more problems with the already fragile recovery process. The U.S. economy could take more brow beating as it struggles to deal with this. Consumer spending seems to be dropping and on all the major areas like home loans, mortgages, credit cards, insurance policies and more and this could be a bad sign.
In the U.S. economy a large part of the overall economic activity is defined by consumer spending. If what drives the economy is not up and running then the economy itself could crumble once more with no back up.
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