The street loved this today, of course the news fails to mention how many hit their limits and are tapped out.
Consumers Cut Back On Borrowing In February
4/7/2008 5:09:21 PM In evidence that they are feeling the pinch of an economic slowdown and possible recession, consumers significantly cut back their borrowing in the month of February. The Federal Reserve reported Monday that after weathering the largest housing crisis since the Great Depression and a far-reaching credit crunch, consumers cut their rate of borrowing in half in February, down to an annual rate of 2.4 percent when compared to January's 4.9 percent.
The increase was the slowest rate since December, when debt growth stuttered to a 1 percent rate.
In particular, a recession in the automobile industry was evident in the amount consumers were willing to take out for auto loans. These, along with other non-revolving credit, crept along at a rate of 0.4 percent in February. In January that rate was considerably more robust at 3.6 percent growth. Credit card debt continued to tick up above the, rising at a rate of 5.9 percent.
Consumers have been moving to put more of their purchases on their credit cards as banks have tightened up on lending standards for home equity loans in response to the deepening credit crisis. The price of homes has fallen sharply in many parts of the country.
Consumer credit edged up to $5.16 billion, which although below expectations, bumped up total consumer credit to a new record of $2.539 trillion. This measure excludes debt associated with real estate, including mortgages and home equity loans.
Last week, the March employment report revealed that the U.S. economy faced its third consecutive month of job loss, with 80,000 fewer jobs than in February. Also, unemployment jumped above 5 percent to 5.1 percent. The numbers have added to concerns that the U.S. is in a recession. To be certain, the economy has slowed to a near halt, with GDP growth around 0.6 percent in the fourth quarter.
The turmoil has led the Bush administration and Congress to usher through a $168 billion economic stimulus package, through which American taxpayers will receive a check in the summer of up to $600 per individual and $1200 per married couple. President Bush remains optimistic that those checks, delivered to some 130 million households, should boost economic growth.
Some lawmakers have stated that a second economic stimulus package is necessary in the face of growing difficulties for the American consumer. However, Bush has rejected the notion, instead imploring lawmakers to let the current stimulus run its course before issuing more.
"Give this one a chance to work," Bush said Monday during a meeting with business executives of small and medium-sized businesses.
The President acknowledged that the economy is going through a “rough time,” although appeared confident in an improvement following the distribution of the stimulus checks. Bush said that he expected an increase in 1 to 1.5 percent in overall GDP by the second half of 2008 as a result of the package. |
