Consumer credit in the U.S. declined in february more than anticipated. Borrowing fell $11.5 billion, this was the 12th drop in 13 months. This could be an indicator that Americans could take on more debt if improvements are not made in the labor market. Confidence could be restored if employment keeps rising.
4 comments:
If borrowing has fallen this could be a good sign. If people have jobs and are earning a sufficient amount of income, they do not have to borrow.
Both of the above comments are good. However, it could also reflect a tightening by banks of not lending if the trend has been a fall in lending over 12 of the last 13 months. Thus, banks are concerned about the economy and not have a whole lot of confidence...investor confidence is low. It could also be that consumer confidence is dropping and that people are afraid to take loans for fear that they will not be able to make the payments. All-in-all I believe it to be at least some combination of all of the above.
I feel like banks have been more reluctant to lend out money because of the low interest rates. I'm not sure if consumer credit falling could be directly attributed to an increase in employment because of the high unemployment rate. I think interest rates may play the biggest role in falling consumer credit.
I don't think the reason why banks are not lending has to deal with low interest rates, i mean it could play a part in it but they are more afraid of lending money out and not getting it back. I think that the decrease in credit comes from banks not lending as well as consumers being afraid to spend their money or attempt to get a loan for fear of defaulting or losing their job.
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