Our Terms of Service and Privacy Policy have changed.

By continuing to use this site, you are agreeing to the new Privacy Policy and Terms of Service.

Consumer credit drop resumes

By Blake Ellis, staff reporter


NEW YORK (CNNMoney.com) -- Consumer borrowing dropped in February, after increasing for the first time in a year during the previous month, according to a government report released Wednesday.

Total consumer credit fell a seasonally adjusted $11.5 billion, at an annual rate of 5.6%, to $2.448 trillion in February, the Federal Reserve reported.

Economists predicted a decline in total borrowing of $0.7 billion in February, according to a consensus estimate from Briefing.com.

"February's decline reflects on the still dire state of the economy," said Yasmine Kamaruddin, an economic analyst at Wells Fargo.

"Even if we have seen retail sales and personal expenditure increase in past months, we haven't seen these gains translate into the use of credit because consumers faced with unemployment and slow wage and salary growth are still shying away from taking on credit," she added.

The decline was led by a 13% annual rate drop in revolving credit, which includes credit card debt.

"It looks as though the credit card market is still in the doldrums," said Kamaruddin. "Commercial banks significantly decreased their holding of revolving credit in February, indicating a charge-off on their parts."

Nonrevolving credit, which includes car, student and personal loans, also fell. It declined by $2 billion, or a 1.6% annual rate, to $1.59 trillion.

January's figure was upwardly revised to show an increase of $10.6 billion in total consumer borrowing from December. The Fed had previously reported a $5 billion rise in January, the first increase in a year.

"The pop last month didn't really reflect the consumer," said Kamaruddin. "It was really due to the federal government's holding of nonrevolving credit, since they were buying up more student loans from private lenders."

Therefore, Kamaruddin expects consumer credit to return to its downward trend and continue to edge lower throughout the year.

"I expect more declines, but smaller declines, as we progress throught the recovery," she said. "We'll have to wait for employment prospects to improve and be sustained before consumers will feel confident enough to build up credit and purchase more."

Last week, a report from the Labor Department showed that the U.S. added 162,000 jobs in March, while the national unemployment rate remained unchanged at 9.7%. To top of page

Index Last Change % Change
Dow 18,432.24 -24.11 -0.13%
Nasdaq 5,162.13 7.15 0.14%
S&P 500 2,173.60 3.54 0.16%
Treasuries 1.46 -0.05 -3.51%
Data as of 12:02am ET
Company Price Change % Change
KeyCorp 11.70 0.05 0.43%
Bank of America Corp... 14.49 -0.19 -1.29%
Ford Motor Co 12.66 -0.05 -0.39%
General Electric Co 31.14 -0.11 -0.35%
Chesapeake Energy Co... 5.42 0.23 4.43%
Data as of Jul 29
Sponsors

Sections

For the first time ever, Amazon and Facebook are more valuable than Berkshire Hathaway, the storied company run by legendary investor Warren Buffett. More

Venezuela's government issues a decree recently that makes it possible to force workers to work in the country's fields amid food shortages. More

Sheryl Sandberg says she supports Hillary Clinton for president, because she would help close the gender gap, and because she's 'the most qualified candidate.' More

It's about to get harder for some luxury all-cash home buyers to hide their identity from the U.S. government. More