Consumer Credit outstanding in Oct fell by $3.5b to $2.483t, about $6b less than the expected drop and Sept was revised to a decline of $8.8b from the initial report of a fall of $14.8b. It has declined for 12 out of the past 13 months and is down 3.8% from the peak in July ’08. Tempering the decline was a $3.4b rise in non revolving credit which consists mostly of automobile loans which rose after the big drop in Sept which was a Clunker hangover from the July/Aug rise. Revolving credit balances fell by $7b. Tighter lending standards, the consumer desire to pay down debt, and the moderate pace of consumer spending are all combining to reduce overall borrowing. This rational consumer response to a tough economic environment with still a huge debt overhang is of course not being followed by the federal government where indirect taxpayer debt continues its steep climb. Private debt reduction is just being replaced by public debt accumulation.
