Consumer Credit Falls by $3.51 Billion in October as Spending Remains Down

A report from the Federal Reserve on Consumer credit revealed that consumers continue to focus on paying off debt and tightening up their pocket books as the recession continues to linger on.

While there are those which have attempted to make this look like some type of positive number because a small amount of economists projected a larger decline, it’s disingenuous in the same way jobs losses slowing down some is a sign we are on the way to recovery.

Growing losses, whether it’s jobs or credit, still means what the numbers say they mean, and not that we’re on a wave or recovery, as those refusing to spend money understand, and wisely refuse to do.

Only those attempting to make government policies look good would take the $3.51 billion in declining consumer credit as a vote of confidence that we are in the midst of economic expansion.

More proof consumers aren’t buying the recovery assertions are the Federal Reserve report also stated consumer borrowing also dropped by a larger $8.77 billion in September, reinforcing the fact that consumers are remaining very concerned over the lack of a real recovery. As far as consumer credit, the $3.51 billion decrease represents an 1.7 percent annual rate of decline.

After the bogus government spending programs which created nothing, economists were drooling over how it had such a positive impact, when in fact it did nothing but put off what is happening now, and that is consumers aren’t spending, and they haven’t been spending with money that they’ve generated from their jobs. They just took a little from the government programs and spent some of it. That’s what’s being called a recovery at this time.

With consumer spending accounting for 70 percent of the American economy in the past, this is sure to keep credit down and borrowing down for some time in the so-called “jobless” recovery.

Credit card and other revolving credit plunged by $6.95 billion for October. Since the peak of consumer credit in July 2008 of $2.6 trillion, credit has fallen for nine months in a row, a record number since it has started to be measured.

It is expected that defaults on credit cards may break a record or at minimum equal the record set earlier in 2009. Unemployment exploding to 10.2 percent should be a key factor in that becoming a reality, as more and more consumers fall behind on their payments.

Since the official date of the start of the recession in December 2007, the U.S. economy has shed 7.2 million jobs, reaching a high in October. The Labor Department says those are the worst unemployment numbers since 1983.

While we await the quarterly reports for some major retailers like Wal-Mart (NYSE:WMT), most of those already reporting support the idea that consumers continue to be spendthrifts, as Saks sales fell of the cliff by 26 percent, with most others also experiencing dismal sales. Even discounter Target (NYSE:TGT) lost 1.5 percent in sales over the same period last year in its latest numbers. Even when Wal-Marts’ numbers come in (which will be positive) all it’ll tell you is people in general went to them rather than more expensive rivals. But even those numbers won’t make up for the extraordinary declines in sales other retail companies experienced.

Best Buy and Toys R Us have yet to release their quarterly numbers as well. Costco Wholesale, as expected, did manage to increase year-over-year sales by about 6 percent, one of the few good retail performances so far this year.

The point is, consumers aren’t buying on credit like they have been before, and spin it as they try, this is probably going to be a disastrous Christmas season for spending, as nothing has truly happened that should loosen up consumer spending, as they know there’s a long way to go before any type of real economic recovery begins.