Consumers choked on the idea of taking down more debt in August, and consumer credit “unexpectedly” contracted 4.6%. Revolving credit which is mostly credit card debt contracted 3.4% and non-revolving credit, mostly autos and student loans, shrank 5.2%.
This is the first decline in 9 months of credit growth.
I haven’t heard a lot of explanations of this from the mainstream economists. But the fact that payrolls are flat, debt is still historically high, and personal savings continue to rise could be a reason. Also, there is the “sentiment” factor. People are concerned, very concerned about their future, rightly so as the economy stagnates, unemployment remains high, prices are going up, and the economy is poised for a decline. Gallup reported today that investor class optimism about the future took a huge plunge (from +33 to -45). The reasons given were:
We believe this is a trend. Watch this and money supply in the coming months and see.
