This week, the Federal Reserve reported that revolving
consumer credit had risen 7.4% from the same period last year. Outstanding credit card debt hit $937.5 billion.
Floyd Norris notes the significance of the recent trends in credit card indebtedness:
credit card debt is growing at the fastest rate in years, a fact that
may signal coming trouble for the banks that issue them…
The annual growth rate has now been over 7 percent for three months
running, the first such stretch since 2001, when a recession was
driving up borrowing by hard-pressed consumers.
The surge in credit card borrowing comes as credit card default
rates are gradually rising, albeit from low levels, and may reflect the
fact that it has become harder for consumers to borrow against the
value of their homes, both because home values have fallen in many
markets and because mortgage lending standards have tightened."
graphic courtesy of NYT
With that as our context, consider these two headlines:
While its possible they can both be right — slowing consumer brings growth down to marginally positive, but not recessionary — I have a sneaking suspicion they both won’t be right.
Which one do you think will be correct . . . ?
How Good Were Holiday Sales Really? http://bigpicture.typepad.com/comments/2008/01/how-good-were-h.html
Real Holiday Spending Was Negative in 2007 http://bigpicture.typepad.com/comments/2007/12/holiday-spendin.html
Some Debt Trends Are Good. This Isn’t One of Them.
NYT, January 12, 2008
Economy Hit As Consumers Tighten Belts
JUSTIN LAHART and KELLY EVANS
WSJ, January 12, 2008; Page A1
U.S. Will Escape Recession, Economists Say in Survey
Shobhana Chandra and Alex Tanzi
Bloomberg, Jan. 9 2007
Here’s the video from CNBC.com: click for video Predictions on Target: Calls for 2008, with Barry Ritholtz, Fusion IQ CEO/director of equity research, and CNBC’s Erin Burnett