By Utta Von Nuremburg

WASHINGTON (MNI) – The total amount of consumer credit outstanding
in September is expected to continue its steady rate of decline, as most
consumers remain unwilling to spend and borrow for discretionary
items in an effort to improve their household balance sheets.

U.S. consumer credit data for September will be released by the
Federal Reserve Friday afternoon and economists in a Market News
International survey predict a drop of $3 billion, following a
downwardly adjusted decline of $4.1 billion in August.

According to Russell Price, senior economist at Ameriprise
Financial, “Although consumers continue deleveraging their debt, the
pace has slowed and much progress has been made at reducing their debt
load.”

The bulk of the drop can be expected from the revolving credit
figure, which will have fallen for 25 consecutive months since September
2008, if expectations are met and no revisions are made to
Friday’s data. This is due in part to weak job creation, lower income
and a sluggish pace of economic recovery. The Federal Reserve’s Consumer
Credit report for August showed that revolving credit dropped 7.24% to
$822 billion.

Despite expectations for a fall in revolving credit, retail sales
excluding autos rose 0.4% in September and 1.0% in August. The ex-autos
retail sales figure can be used as an indicator for revolving credit
because it encompasses mostly discretionary spending.

Offsetting the decline in revolving credit, nonrevolving credit —
which includes loans for autos, tuition and vacations — is likely to
post another monthly gain. In August, nonrevolving credit rose for its
fourth consecutive month by 1.25% to $1.592 billion.

Of note, new orders for manufactured durable goods increased 3.5%
in September and new orders for nondurable goods rose 0.9%.

Durable goods are by definition products that have a life
expectancy of several years — including autos, computers, and machinery
— and as such can be expected to contribute to the rise in September’s
nonrevolving credit figure.

–Utta Von Nuremburg is a Washington reporter for Need to Know News

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: MAUDS$,M$U$$$]