Where is the Credit: Part II ?

Source: Bud Conrad ( Casey report )

Data published on Oct. 7 confirms what we all know, that the U.S. consumer is not borrowing to spend. In a world where credit has become so important to consumer spending, and where consumer spending drives 70% of GDP, the indicator confirms that the economy is still in slow-growth territory.

While overall consumer credit continues slowing and is now declining at a rate of close to 5%, the subset of revolving credit, namely credit cards, is slowing even more – by 7.8%.

And consumer credit isn’t all that’s on the decline: commercial and industrial loans are off 12%.

Borrowing tends to be a lagging indicator, as the aftermath of a recession still lingers in the minds of consumers, and is reflected in more cautious banking practices. As the charts clearly show, the whole private sector is still in record-low borrowing mode.

The government, on the other hand, is doing the opposite – borrowing like crazy – in an attempt to counteract the Great Deleveraging. If we didn’t have the government directly supporting specific markets, the trends in private-sector borrowing would likely be even worse. And, with them now falling at a record pace, they are already about as bad as it gets – confirming how serious the current recession is.