U.S. Consumer Credit Fell $9.5 Billion in August

August marked the largest drop in consumer credit in almost a year according to a statement released by the Federal Reserve on Sunday.

The $9.5 billion decrease follows an $11.9 billion increase the previous month. The Feds also announced that non-revolving credit such as student loans and the financing of automobiles fell by the largest percentage in three years. Non-revolving loans were down by $7.23 billion in August.

The drop in consumer credit means Americans are either paying down old debt or simply lack the confidence based on the current economy to buy non-essential goods.

Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York told Business Week:

“Consumers were cautious over taking on additional debt at the end of the summer after the volatility in the stock markets and the uncertainty caused by the failure of Congress to work together to bring down these trillion-dollar deficits.”

… but not for everyone:


Stocks Tumble; Wealthy Keep Shopping

When stock markets tumble, wealthy U.S. shoppers typically cut back their visits to such luxury emporiums as Saks Inc. (SKS) and Nordstrom Inc. (JWN). Yet even as the markets have seesawed, they’ve kept right on spending.

Exhibit A: Saks and Nordstrom yesterday reported September sales that exceeded analysts’ estimates, while luxury retailers as a whole outpaced all other segments except gasoline-selling wholesale clubs.

Affluent Americans aged 24 to 49 who have a yen for high living and bling are helping drive luxury sales, says Unity Marketing, which conducts quarterly shopper surveys. One cohort, called the “X-Fluents” — for “extremely affluent” — are responsible for 23 percent of luxury sales in the U.S., up from 18 percent in 2007, the Stevens, Pennsylvania-based firm said in a Sept. 14 client presentation it provided to Bloomberg News.

“The U.S. marketplace is more concentrated among young people,” said Unity President Pam Danziger. “They are more predisposed to luxury indulgence and represent more promising targets to luxury brands.”

X-Fluents were out in force again last month, she said.

Another group that Unity has dubbed “Aspirers” are also spending more on luxury, according to Danziger. They favor “flash, bling and status” and now account for 18 percent of luxury sales compared with 16 percent in 2007, she said.
…Their wherewithal stems from job security, bonuses and stock options, Pedraza said. Many are clustered in financial services and Silicon Valley, removed from the economic challenges other Americans face.

Dollar Collapse