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Consumer Credit in U.S. Fell by Most in Three Months

The troubles continue despite the barrage of good news that is announced from any and every media outlet. The latest blow (or rather non-boost) to the story of good times are around the bend is: Consumer credit in US fell by most in three months.

From that article,

Consumer credit in the U.S. declined in February more than anticipated, indicating Americans are reluctant to take on more debt without further improvement in the labor market.


The drop was the 12th in 13 months and shows consumer purchases, which account for about 70 percent of the economy, will be limited until households become more optimistic about the recovery. Confidence to finance spending may be restored if employment keeps rising after a March payroll gain that was the biggest in three years.

“I don’t think we’re going to have the credit-fueled spending we had in the past,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors LLC in St. Louis. “A lot of consumers are deleveraging. They see excess borrowing as threatening.”

and lastly,

In 2009, credit-card write-offs increased 59 percent to $89 billion from $56 billion in the previous year, according to R.K. Hammer Investment Bankers, in Thousand Oaks, California. Write- offs and delinquencies typically track the unemployment rate.

Remember that the biggest boost from the stimulus as far as job creation was concerned was slated to be towards the end of 2009 and then tapers off into the first quarter of 2010 (Romer: Impact of stimulus will wear off and The end of the Great Recession). That means that this is the best consumer related effect that we should see – at least from the point of view of job creation filtering back into consumer demand. After that, the expectation will be that the economy grinds on under its own powers.

The masters of our fates seem wedded lock, stock and smoking barrels to the idea that all that needs be done is to rouse the animal spirits (that’s us folk, never mind the implied condescension). And like a bunch of wildebeests, we shall run off to our jolly lives, never mind the fire on the savannah. But there’s nothing left to spend except what one possibly brings in every paycheck and that is key. You haven’t been hearing the term jobless recovery (for a time, that was being used) – but a jobless recovery is a failed stimulus and that will be the tell.

However, there is something poignant about the term animal spirits for our masters use the term to really mean : enslaved spirits, blinders on and doing whatever they command without actually commanding us. The few of us who might be familiar with animals know that an animal, even a domesticated one, can be quite an unpredictable beast and a herd of animals can summon quite an unpredictable spirit. Wildebeests are easily spooked and they can set off on a gallop thither but they can also turn and run straight back at you and trample you underfoot. That’s animal spirits for you.

Category: Supply Chain Management


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April 2010