Saturday, November 8, 2008

Still Borrowing

Increasing unemployment levels, reducing expenditures for retail activities and eating out, but our debt is increasing. Our revolving debt that is, which is the only access to debt that many people have right now. In this article from the Associated Press titled Consumers unexpectedly borrow more in September the issues are examined. Lets take a look -

Consumers boosted their borrowing in September, defying expectations for a cutback.

The Federal Reserve's report, released Friday, says consumer credit increased at a 3.2 percent annual pace in September. That was up from a 2.9 percent rate of decline in August and marked the biggest increase since July.

The Fed's measure of consumer borrowing does not include any debt secured by real estate, such as mortgage or home equity loans.

But for the July-September quarter as a whole, consumers pulled back sharply in their spending, a main reason why the economy contracted during that period, the government reported last week.

With jobs disappearing and Americans watching their wealth shrink, economists are expecting further retrenchment by consumers. That's factoring into predictions for more shrinking economic activity in the current October-December quarter.

The bubble methods of refinancing with a cash out or HELOCing is no longer possible to fund expenses. Credit cards and other revolving debts are easy ways to keep up with expenses. It would be fascinating to find out what type of purchases these were - essentials of food, gas, clothing and utilities would be our guess.

How much will cutbacks on non-essentials affect holiday shopping. A time of the year that retailers count on to keep them in the black is going to be pretty. How many others will follow Linens and Things lead?

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