Reluctant Borrowers: Another Canary?

I doubt the point needed further underscoring, but just in case, the latest consumer credit data from the Fed offered more evidence to support the contention that the world’s largest economy could falter in the face of slowing consumption.

Both retail sales and personal spending data for October suggested the American consumer, while not tapped out, lost some zeal after a Q3 that witnessed the most spectacular quarterly rate of consumption ever recorded, as the economy rebounded from Q2’s historic collapse.

The Fed figures, out Monday, showed total consumer credit rose just $7.2 billion in October, less than half of the $15.5 billion economists expected.

The annual pace of growth (2.1%) was down sharply from September’s annualized rate.

Meanwhile, revolving credit contracted for a seventh month in eight. The $5.47 billion drop takes total revolving credit outstanding to a three-year low.

Again, what’s notable is that these figures cover October, when Congress was busy failing to cement a new stimulus deal, while millions of jobless Americans pondered an uncertain future both politically and economically, with no guarantee that emergency benefits would be extended.

Fast forward to December and there is still no such guarantee, although a bipartisan bill worth some $908 billion is gathering adherents, even if Mitch McConnell isn’t yet one of them.

On Monday, Chuck Schumer accused McConnell of failing to negotiate and implored Mitch to “catch up” to the moderate Republicans working on the deal.

In comments of his own, McConnell insisted that his targeted package meets the critical needs of voters and businesses. “Let’s get it done,” he said, adding that nobody should expect differences of opinion on policy to disappear overnight.

On that latter point, I’d have to agree with Mitch.