Consumer Confidence Drops But So Does Consumer Debt...For The First Time In Almost A Year

Tuesday, September 11, 2012 06:40
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Consumer Confidence Drops But So Does Consumer Debt...For The First Time In Almost A Year

Tags: economic indicators | Federal Reserve | US investing

Consumer debt dropped $3.28 billion in July in an unexpected decrease that was also the first in almost a year. The drop followed an upwardly revised increase of $9.8 billion in June. Economists had predicted an increase in June of $9.2 billion.

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Although credit card debt is still rising slightly but, overall, consumers are still delevering after the 2008 crisis. The September 10 report includes revisions going all the way back to December 2010, resulting from two surveys of finance companies by the Federal Reserve in 2010 and 2011.
 
The survey is conducted every five years to gauge borrowing levels of US consumers and businesses.
 
Debt for college tuition and expenses as well as for items like automobiles—non-revolving debt—made its smallest gain in July since a decrease in August of 2011.
 
Auto sales were the strongest in three years in August of 2012, a fact which may have kept debt levels from falling further.
 
Revolving debt had its second decline in a row, the first consecutive decline since February of 2011. The survey excludes debt like home equity lines of credit and home mortgages which are both secured by real estate.
 
Consumer spending rose but at the slowest rate in three quarters. The Conference Board’s index of household confidence declined from a revised 65.4 in July to 60.6 in August. That’s the biggest single month decline in confidence since last October.
 
Improvement on the employment front will help. The Fed meets on Wednesday and Thursday and everyone will be waiting to see if this meeting yields another statement of wait and see or if some action is finally taken.

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