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U.S. consumer borrowing fell more than expected in March, plunging a record $11.1 billion, a Federal Reserve report showed Thursday.
March consumer credit fell at an annual rate of 5.2% to a total of $2.55 trillion. This was the biggest percentage drop since December 1990.
Non-revolving credit, which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, dropped $5.7 billion, or at a 4.2% rate, to $1.6 trillion.
Revolving credit, made up of credit and charge cards, fell $5.4 billion, or at a 6.8% rate, to $946 billion in March. This compared with a revised $9.7 billion drop in February.
There is no way those loans can be all paid back, so they won't. Rising unemployment and falling asset prices seals the fate. As a sign of consumer retrenchment, banks willingness to extend loans, and rising defaults, we are about to see the first contraction in consumer credit since the early 1990's.
By Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Posted May 8th, 2009 by Armen Hareyan
