More Consumer Credit Isn't Necessarily a Sign of Recovery

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The uptick in the September consumer credit numbers means that people are buying more things and spending more money, which should be a good thing. But the fine print doesn't exactly tell a positive story. After a big dip from the previous month, consumer credit numbers indeed made a comeback, Real Time Economics reports, increasing "by $7.39 billion to $2.452 trillion, the Federal Reserve said Monday." Eric Morath and Jeff Bater added, "Economists surveyed by Dow Jones Newswires had forecast a $4.0 billion expansion in consumer credit. The figures are a significant turnaround from August when consumer credit fell $9.68 billion, according to revised figures."

More borrowing means more buying of things, right? Not exactly. They point out that "the jump was driven by an increase in nonrevolving credit, which includes student loans, perhaps suggesting that more people are returning to school. So more student loans, less new cars. But even deeper than that, The New Yorker's James Surowiecki suggests that even if consumers do keep up the spending, it's not what will save the recession. "The important lesson is that, if, after all, consumers aren’t keeping their spending unnaturally low, we can’t look to them to jump-start this recovery, even though they’ve been the engines of recovery in the past," he writes. "This time around, business, export markets, and, especially, the government need to do what consumers can’t."

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