Consumer credit falls for 8th month

Longest streak of declines since Federal Reserve started keeping records 56 years ago.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Julianne Pepitone, staff reporter

When will you be debt free?
Enter credit card information
  CC name Balance
Choose a plan
Minimum payments only
Fixed payments
$ monthly
Debt-free deadline
I want to pay off my credit cards in:
years and months
Find the best credit card for you among thousands of issuing banks.
Select a card type from the pulldown menu and click on the arrow to begin.

NEW YORK ( -- Consumer credit fell in September for the eighth straight month, the longest streak of declines since the Federal Reserve started keeping records in 1943.

Total consumer borrowing fell a seasonally adjusted $14.8 billion, or 7.2%, to $2.456 trillion in September, according to the Federal Reserve.

Economists predicted a decline in total borrowing of $10 billion in September, according to a consensus survey from August saw a downwardly revised $9.9 billion decrease in total consumer borrowing.

September's total borrowing is down 7.3% from last year. Last August, consumer credit contracted for the first time since January 1998.

"These are not minor declines we've seen over the past few months," said Sean Maher, economist at Moody's "Credit is falling at a fairly rapid pace."

Revolving credit, which includes credit card debt, tumbled $9.9 billion, or 13.3%, to $898.9 billion. That's a 10% decrease from the previous year.

Nonrevolving credit, which includes car and student loans, fell by $4.9 billion, or 3.7%, to $1.567 trillion. That's a 3.8% drop from last year.

The decline in nonrevolving credit is "really surprising, given the surge of vehicle sales driven by the Cash for Clunkers program," Maher said.

Vehicle sales typically show up on balances the month after they were made, and many of the Cash for Clunkers purchases took place in August, Maher said.

As the economy continues to shed jobs by the thousands, the credit crunch is being compounded. Cash-strapped consumers have a tough time paying their bills and are more reluctant to take on additional debt.

Indeed, Maher said he thinks the decline is largely due to consumers saving the cash they have and moving away from reliance on credit to pay their bills.

Another factor is that banks have tightened lending standards because of a heightened default risk, so consumers see less credit available to them.

Earlier Friday, a separate report showed the national unemployment rate rose much more than expected in October, to 10.2%. Economists had predicted 9.9%, and the October data marked the first time since 1983 that the rate crossed 10%.

Unemployment will likely peak in the second quarter of 2010 and will start to decline in June, Maher predicted.

"Consumer credit will not see a turnaround until unemployment begins to moderate," Maher said. "Until that time, people are staying in the trenches." To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
America's best-performing female CEOs These women run companies whose stocks surged in the past year -- significantly beating the S&P 500. More
Tech's highest paid women Silicon Valley isn't known for its diversity, but it is home to a handful of highly paid female executives. More
9 reasons to be hopeful about women in tech These startups are working to leverage technology to level the playing field for minorities and women in tech. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play