RISMEDIA, November 10, 2009—(MCT)-Outstanding consumer credit fell at a 7.2% annual rate in September 2009, the eighth consecutive decline, the Federal Reserve reported. Credit balances had never fallen eight months in a row before in the 66-year history of the data.
Consumer credit fell by $14.8 billion to $2.46 trillion in September, down 4.7% compared with a year ago. Outstanding credit can fall if consumers pay off balances, or if lenders write off bad loans.
Outstanding balances have fallen in 12 of the past 14 months. Credit fell a revised $9.9 billion in August, revised down from the original estimate of a $12 billion drop. Before the steady decline during this recession, outstanding consumer debt had more than tripled in the 16 years between 1992 and 2007. The figures are not adjusted for inflation.
Although consumer debts have fallen by $126 billion since July 2008, household wealth has tumbled by $11 trillion, said Joshua Shapiro, chief economist for MFR Inc. Consumers have only begun to deleverage. The figures do not include mortgages or other debts backed by real estate, such as home-equity loans.
The decline in September was led by another huge drop in revolving debt, such as credit cards, which fell $9.9 billion to $889 billion, or a 13.3% annual rate.
Nonrevolving debt — such as auto loans, student loans and other personal loans — fell $4.9 billion to $1.57 trillion, or a 3.7% annual rate. Nonrevolving debts had increased in August at a 0.2% pace, largely because of higher auto sales due to the cash-for-clunkers subsidy. For the third quarter, outstanding debt fell at a 6.1% annual rate after a 6.6% annual decline in the second quarter, which was the largest percentage decline since 1980. Credit-card debt fell at a record 10% annual rate in the third quarter after sinking at a 9.7% pace in the second quarter and 9.6% in the first quarter. Nonrevolving debt fell at a 3.8% annual rate in the third quarter.
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