Wednesday, October 12, 2011

Uh Oh!

The Lehmann Letter (SM)

So many eyes are turned to Europe, sometimes a domestic statistic escapes widespread attention.

The Federal Reserve recently reported that consumer credit fell by $114.0 billion in August (the latest available month) on a seasonally-adjusted annual basis:

(Subtract the August level from the July level and multiply by 12.)

You can see from the chart that these data display considerable volatility, so one month’s drop may not signal anything significant. But you can also see that, after many months of decline, consumer credit began growing once again. Now we must be on the alert: Is the August report a statistical vagary, or does it signal a downturn?

Consumer Credit

(Click on chart to enlarge)

(Recessions shaded)

Everyone knows the economy is weak and the recovery anemic. This could be an early signal that households intend to further reduce their expenditures.

Stay tuned.

(To be fully informed visit

© 2011 Michael B. Lehmann

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