Consumer borrowing unexpectedly surges in March

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Submitted by HarryBosch on May 7, 2008 - 12:56pm

http://news.yahoo.com/s/ap/20080507/ap_o...

By MARTIN CRUTSINGER, AP Economics Writer

WASHINGTON - Consumer borrowing rose in March at the fastest pace in four months, more than double the increase of the previous month.

The Federal Reserve reported Wednesday that consumers increased their borrowing at an annual rate of 7.2 percent, compared with a 3.1 percent rate of increase in February.

The gain was much larger than economists had been expecting and reflected strong borrowing on credit cards and also in the category that includes auto loans.

The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting. The bigger gain was seen as a sign that the weaker economy was forcing consumers to increase their borrowing to support spending.

Borrowing on credit cards was up at an annual rate of 7.9 percent, compared to a 5 percent gain in February, while borrowing in the category that includes auto loans jumped by 6.8 percent, compared to a 2 percent increase in February.

The overall growth in debt of 7.2 percent at an annual rate was the biggest gain since an increase of 8.25 percent last November.

Consumers have been moving to put more of their purchases on their credit cards as banks have tightened lending standards for home equity loans in response to the deepening credit crisis.

The Fed's measure of consumer borrowing, which does not include any debt secured by real estate such as mortgages or home equity loans, stood at a record $2.558 trillion in March.

‹ The Rise of the Rest - Newsweek For those of you not following. The Shanghai index is at a 52week low, down 49.2% from peak ›
The party is over and
Submitted by kewp on May 7, 2008 - 1:00pm.

The party is over and everyone is filling their cups with whatever kool-aid is left in the punch-bowl.

First we had the dotcom
Submitted by HarryBosch on May 7, 2008 - 2:01pm.

First we had the dotcom bubble bust.
Now we're in the housing market bubble bust.
Along with the gas bubble currently being pumped up.
Next up is the credit card bubble bust.

It's like an economic pipeline with multiple outlets with balloons (markets) attached to each outlets. And as each outlet inflates the balloons with liquid cash they eventually burst. Pretty soon you've got all these leaks as money (capital) leaks out of the US economy. It's obvious that the value of the US economy is declining as evidenced by our GDP.

Might as well reach back and add in the losses from US Auto makers jobs, US electronics jobs, US computer jobs, etc.

Not sure if this is the right analogy but at any rate the picture is not good.

Maybe what we should focus on is one or two of this country's "last few remaining" marketable commondities, something that people in other countries look forward to buying from the U.S.A. and that is: entertainment and higher education. Lots of foreigners come to the U.S. for education. Lots of foreigners like to watch films made in the U.S. I dont think the reverse is as profitable. So let's play to our strengths: entertainment and higher education.

My opinion? This is more
Submitted by stockstradr on May 7, 2008 - 5:39pm.

My opinion? This is more proof it is time to make easy money shorting the stock market. The only reason GDP hasn't gone negative is that the country is running on fumes, and credit card borrowing.

The optimists (recession deniers) drove the S&P500 back up to 1420. OK, now all the smart people need do is short the market, and WAIT, wait until the economic data bursts the bubble of denial. That will send the markets tumbling down.

The big, nasty recession has started, and it will take the markets south. They fell 1.8% today. My puts are looking good, and I'm buying more.