Or, in a demonstration of individual rationality, doesn’t follow the script where consumers sacrifice themselves and go even deeper in debt to spark further economic recovery:
While some pundits out there might have you believe that the US economic recovery remains solidly on track, Friday’s May jobs report threw a spanner into those notions, and the latest reading on consumer credit offers little evidence that the crucial consumer intends to share with Uncle Sam the burden of bolstering the economy.
The Federal Reserve’s report on April consumer credit today shows total credit outstanding rose a little less than $1 billion, following a revised $5.4 billion drop in March; March credit was originally reported up $2 billion.
Within the details, the item that jumps out most is the decrease in revolving credit, which fell at a 12% annual rate and declined for the 19th straight month. Revolving credit outstanding has fallen 14%, or roughly $138 billion, since autumn of 2008. Non-revolving is roughly flat since late ‘08.
It would help if the pundits would settle on one of the two diametrically opposed roles that consumers are “supposed to” assume. At an individual level, consumers are being lashed for their profligate spending and borrowing habits, and excoriated for their unprecedented levels of personal debt. This is bad, the pundits say (and I don’t disagree): individuals and families should not be taking on so much debt and efforts to reduce outstanding debt are praised. However, consumers as a group are expected to spend, spend, spend in order to help pull the retail sector back into healthy growth.
So if they do the right thing as individuals, they’re doing the wrong thing for the economy as a whole? Perhaps the emphasis on consumer-led recovery is mistaken, especially given the levels of debt that consumers have already taken on.
