(snip)"WASHINGTON – Consumer borrowing fell again in May, more evidence that Americans remain jittery over their finances and the durability of the economic recovery.
The Federal Reserve said Thursday that borrowing dropped by $9.1 billion in May. It also said borrowing declined by $14.9 billion in April, revising an initial estimate that showed a gain of $995 million for the month.
Consumer borrowing has fallen in 15 of the past 16 months as households have struggled with uncertain job prospects and battered finances following a deep recession.
In May, consumers borrowed less on their credit cards and took out fewer auto loans. Credit card borrowing has fallen for 20 straight months.
Many consumers, confronted by a deep recession and a weak job market, have tried to get their household finances in better shape by reducing their debt levels. In addition, banks during the recession have imposed tighter lending standards in an effort to cope with their rising levels of bad loans.
Analysts said the significant downward revision to April borrowing and May's decline show that consumers remain leery about taking on new debt.
"There is simply no way to spin this data, nor the past few months, as anything other than a confirmation that the consumer has not come roaring back," said Dan Greenhaus, chief economic strategist at Miller Tabak in New York. "The consumer remains quite stressed ... with income growth relatively muted and labor improvements few and far between."(snip)
There are arguably two important take-aways from this Federal Reserve 'update'. The first is that yet another of the gov'ts 'rosy' official estimates released earlier in the year - which arguably constituted a basis for mainstream economic media opinion that the recession was turning around - was pure and utter 'fiction'. How else can one characterize an early estimate of +1 billion versus a revised estimate of -15 billion after the actual data comes in ?
The second, which is arguably of importance to exotic dancers, is that a significant number of middle class Americans ( i.e. your club customers ) are now choosing to use a major portion of whatever cash is available to them for 'non-essential' spending ( i.e. buying lap dances ) to instead pay down their credit cards / pay down their auto loans / pay down their mortgages and otherwise get their own financial 'house' in order.
I'll also throw in some related 'historical' observations. It is well documented that, over the past decade, US consumers were ( on the average ) spending about 6% more money than they were actually earning ! This of course was accomplished by taking on additional debt - via mortgage re-fi's and/or larger auto loans and/or rising credit card balances. With today's tighter lending standards / tighter income verification regulations etc. that debt growth is now ancient history. Thus by 'definition' the level of US economic activity going forward must be 6% less than it has been over the past decade if US consumers are no longer 'growing' their debt levels !!!
In addition, if many US consumers are now choosing to pay down their existing debts, the level of US economic activity is going to be even lower ... since the example of a club customer choosing to pay down his credit card instead of going to a strip club will be repeated throughout other segments of the US economy. And if you combine this additional percentage reduction in consumer spending ( paying down debts does not count as 'spending' since it creates no new economic activity )with the above 6% loss of 'debt expansion', you arrive at a percentage of economic contraction that definitely exceeds any reasonably expected overall economic growth estimate. The clear conclusion then must be that the US economy will continue to contract in the short term at least.
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