“The decline in revolving credit, mostly credit cards, was a big surprise, suggesting consumption in March was even weaker than feared.' Credit card use saw the biggest percentage decline in March since January 1989.
The numbers: U.S. consumer borrowing dropped sharply in March, according to Federal Reserve data released Thursday. Total consumer credit fell $12 billion, or at a 3.4% annual rate, in March, the first decline since August 2011. It follows a $19.9 billion gain in February.
What happened: Revolving credit, like credit cards, fell $28.2 billion, or 30.9% annual rate in March. That’s the biggest percentage decline since January 1989. Non-revolving credit, typically auto and student loans, rose $16.1 billion or 6.2%. The data does not include mortgage loans. Big picture: Weaker personal income growth and rapid job losses kept consumers from using credit in March. Total retail sales fell a record 8.7% in March as the economy was shut down to stop the spread of coronavirus. A Fed survey of senior loan officers reported tightening lending standards and weakening demand for credit cards and auto loans. How consumers react as states start to reopen will be key to how the economy recovers.
What are they saying? “The decline in revolving credit, mostly credit cards, was a big surprise, suggesting consumption in March was even weaker than feared. We can speculate that intermediate consumers, like restaurants purchasing supplies, may have accounted for a larger share of credit card usage than we knew,” said T.J. Connelly, head of research at Contingent Macro.
Market reaction: U.S. equity benchmarks closed higher Thursday on hopes the country might get back to work soon. The S&P 500 index SPX, +1.68% finished up 32.77points or 1.2% to 2,881.
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