Consumer Borrowing Drops
Consumer Borrowing
Consumer borrowing took a dive in March at the fastest pace in 18 years as Americans put away their credit cards and hoarded cash amid the worst recession in decades.
The Federal Reserve said Thursday that consumer borrowing dropped 5.2 percent in March, the biggest decline since an 8.1 percent fall in December 1990.
In dollar terms, consumer borrowing plunged by $11.1 billion. That’s the largest dollar amount on records dating to 1943, and more than three times the $3.5 billion drop that economists expected.
The borrowing category that includes credit cards dropped 6.8 percent in March after a 12.1 percent plunge in February. The category that includes auto loans fell 4.2 percent after rising by 1.2 percent in February.
The Commerce Department last week said that the personal savings rate edged up to 4.2 percent in March, marking the first time in a decade that the savings rate has been above 4 percent for three straight months.
Households have been spending less and saving more as they are facing massive job layoffs. Layoffs slowed to 539,000 in April, however the jobbless rate continues to rise due to employers wary of hiring new employees during a recession. Oil prices rose to $58 a barrel Friday as better than expected U.S. unemployment figures boosted the mood among investors betting that a year-end recovery in the global economy will help oil demand.
Consumer spending, which accounts for about 70 percent of total economic activity, fell 0.2 percent in March, ending an otherwise strong quarter. Consumer spending grew at an annualized rate of 2.2 percent in the first quarter, according to government data.
Still, the overall economy was contracting at an annual rate of 6.1 percent in the first three months of this year following a 6.3 percent fall in the final three months of last year. That marked the worst six-month performance in a half-century.
Fannie Mae says it needs $19 billion in additional government aid after posting a loss of $23.2 billion in the first quarter as the taxpayer bill from the housing market bust mounts. They received $15 billion last year!
While some companies did better than expected, Toyota posted a loss $7.7 billion in the first quarter of this year, even bigger than GM’s loss. This has been the worst fiscal year for Toyota since 1937, when the company was founded. Japanese electronics giant Toshiba has also posted record loses for the first quarter. Stateside, McDonalds has reported a 6.9 percent increase in sales during the month of April with the introduction of premium coffee and their chicken snack wrap.
Economists are counting on President Barack Obama’s $787 billion stimulus program with increased government spending and tax cuts for individuals and businesses to boost growth in coming months and get the country out of the recession.
Many analysts believe the economy is declining in the current quarter by around 3 percent, and could turn slightly positive in the third quarter.
The $11.1 billion drop in consumer borrowing in March left total consumer credit at $2.55 trillion. The Federal Reserve’s measure of consumer credit does not include home mortgages or other loans secured by real estate.
Well, during an credit crisis I would hope it drops!
It takes a crisis for us to learn.
Exactly..
Don't stop borrowing now, we need the economy to go on!!
I think people really want to borrow, but they cant because of there credit repair problems.
Hopefully this will drop the price of HD Tele's!
Hopefully this will drop the price of HD Tele's!