The latest news in the area of consumer credit is good news. While consumer credit declined in October for the ninth month in a row, the drop was much less than what most of the experts anticipated that it would be. In fact, many experts believed that consumer credit would fall nearly $10 billion in October. However, the actual drop was right around $3.5 billion. That’s tremendously good news. This signifies that credit markets are reopening, and that everything from home loans to personal loans to credit cards are finding their way back to consumers.
September’s drop, as well, is not as bad as it was thought to be. The estimate for September was originally down by nearly $15 billion. The revision puts the fall at around $9 billion for that month.
When you combine the tremendously better than expected news for October with the positive revision of the data from September, there is reason for optimism. It suggests that the demand by consumers for additional funding wasn’t completely destroyed during the consumer deleveraging process.
If things keep going like they are, it’s likely that we’ll see even more and more growth in the consumer credit area before 2009 is up. This increase in the level of consumer credit could be a very good thing for the markets, and could serve as something of a motivator for investors. In addition, it will signify to investors that consumers are willing to do what it is going to take to get their own economy out of the recession.
Specific details of the trends are encouraging, too. This is especially true in the area of durable goods. There was a decline of just under $7 million in the area of revolving credit, which represents a drop of less than a percent. The interest rates on credit cards and on personal loans stayed at the levels of the previous month.
Nonrevolving credit, such as that credit which makes up car loans and home loans, was helped by a significant boost in car sales during the month. Nonrevolving credit rose by about $3 million from the September numbers. This comes, at least in part, from a drop in car loan rates. The rate dropped to an average of 3.42 percent in October compared with 3.5 percent during the month of September.
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