Essentially the Only One

August borrowing drops at 3.7 percent rate

The Federal Reserve said Tuesday that consumer borrowing fell at an annual rate of 3.7 percent in August, before the financial crisis became acute in September, forcing the government to approve a $700 billion rescue of the financial industry.

August's decline in consumer credit marked the first time that total borrowing had fallen since a 4.3 percent rate of decline in January 1998.

The weakness reflected a big decline of 5.4 percent at an annual rate in the category that includes auto loans and a 0.8 percent rate of decline in the category that includes credit cards.

I predict that this will not be an exception and we will see months of further decline. For two reasons: Firstly, credit is drying up rapidly and comprehensively. Secondly, and less significantly I suspect, people are pulling back from making big purchases as they see their household net worth crater and their debts spiral upwards.

For an economy that relies on consumer spending for about 70% of its growth, this is not good news.

But there seems to be so much bad news right now that this little tid-bit was buried deep in the business pages.