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

Frontline troops push for solar energy
The U.S. Marines are testing renewable energy technologies like solar to reduce costs and casualties associated with fossil fuels. Play
25 Best Places to find rich singles
Looking for Mr. or Ms. Moneybags? Hunt down the perfect mate in these wealthy cities, which are brimming with unattached professionals. More
Fun festivals: Twins to mustard to pirates!
You'll see double in Twinsburg, Ohio, and Ketchup lovers should beware in Middleton, WI. Here's some of the best and strangest town festivals. Play
Index Last Change % Change
Dow 16,614.81 215.14 1.31%
Nasdaq 4,419.48 103.41 2.40%
S&P 500 1,941.28 37.27 1.96%
Treasuries 2.22 0.01 0.45%
Data as of 9:05am ET
Company Price Change % Change
Regions Financial Co... 9.26 0.10 1.09%
Comcast Corp 52.19 0.89 1.73%
Applied Materials In... 20.78 0.71 3.54%
Citigroup Inc 51.27 0.74 1.46%
Wells Fargo & Co 50.45 1.27 2.58%
Data as of Oct 21

Sections

The midterm elections are around the corner, and the economy remains a top concern. With unemployment down and inflation low, why do people still feel the economy stinks? More

Yahoo was in the spotlight Tuesday as it released its third-quarter results, its first earnings release since the Alibaba IPO. More

Startups focusing on "ag tech," or agricultural technology, are gaining the attention of farmers and investors More

Foreign workers, lured by false promises of good jobs and benefits in America, soon find themselves enslaved in plain sight as victims of labor trafficking, a report from the Urban Institute finds. Here's how it can happen. More

Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.