The largest decline of credit use in America since 1978

The monthly data released by the Federal Reserve show that consumer spending on credit cards reduced sharply while even the holiday season didn’t’ appear to substantially boost the customers; use of plastic. According to the analysts over the past three months ‘nominal consumer spending has been falling at the fastest rate since World War II’.

The Fed's monthly G.19 report on consumer credit revealed the revolving credit - a category of loans made up almost entirely of credit card debt – reduced 7.8% in December while in November the Federal Reserve reported a 3.4% decline at an annualized rate. But, the figure was revised sharply lower in the current report to 8.5%. It was the largest ever recorded in terms of dollar amount and was the steepest percentage fall since January 1978. Total revolving debt in December fell to $963.5 billion from a total of $969.9 billion in November. On the whole consumer credit (revolving and nonrevolving) dropped by 3.1% to $2.562 trillion from $2.569 trillion in the previous reading.

"Not spending is a symptom. The disease is unemployment," says Tony Plath, professor of finance at the University of North Carolina at Charlotte. According to the latest data unemployment increased to 7.6% in January with 600,000 jobs lost in the U.S. Thereby the total number of job losses recorded since the recession started in December 2007 stands for over 3 million. Meantime, lenders are becoming stricter when extending credit to consumers.