Outstanding consumer credit rose by a 10%annual rate in September, which is the largest rate increase since April of 2014. This is due to low gas prices and a strong US dollar. The dollar increase was the largest since 1941, not including inflation. Revolving credit rose by an annual rate of 8.7% in September in comparison to 5.3 % in August. On Friday, the Labor Department said employers added 271,000 jobs in October. This could help support more borrowing and spending. During the third quarter of this year, Business investment fell, which puts more pressure on consumer spending to help increase productivity. This news can also affect the interest rate decision. Because consumers are spending and borrowing more, we might see inflation numbers that the Federal Reserve would like to see to raise the interest rate. I am interested to see the Fed's decision based on this information. What do you guys think?
http://www.wsj.com/articles/u-s-consumer-credit-rises-by-28-9-billion-in-september-1446840373
5 comments:
Increasing consumer credit is usually a good sign because it shows growth in the economy. It can either indicate that consumers aren't making enough money and need credit to finance their expenditures, or they are just consuming more. The latter of these cases is probably the most reasonable being that the dollar is strong now and oil prices are down.Hopefully consumers don't get themselves into credit traps. Also, this would be a good indication that it;s time to raise rates since consumers obviously don;t have an issue with the current rates since they are spending so much on credit.
I agree with John. I do think that this credit jumps is proof that the economy is doing quite well and that now is the time to raise rates. Especially now that the holiday season is coming up, it could be very possible that consumers will carry this confidence into the stores and overspend beyond their means if rates aren't raised soon. This could possibly be the tipping point if people keep spending in this manner.
I do agree that this credit rise means positive things for the economy. With credit rise means a increase in consumer confidence, as Rachael said it can led to an overspending in stores but I think it could mean bigger. An increased credit score can increase the amount consumers can spend on a mortgage for a house, or to finance a new car, and apply for more credit card to expand consumer's affluenza problem.
Addition of 271,000 jobs and increasing consumer confidence are definitely good signs for the economy. I am also interested to know what the inflation numbers look like in the next couple of months, which would impact the Fed's decision to raise the interest rates. Fall in business investment is perhaps another reason for the Fed to raise the rates soon so that savings increase in order to help increase investment levels, which would eventually help the economy in the long-run.
I think this is a good sign for US. Federal Reserve has planed to increase the interest rate long time ago. But interest rate is not increased yet since the economy was not good enough. Now the credit jumps shows US is ready for interest rate increasing.
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