At first glance the numbers on consumer borrowing released by the Federal Reserve on Tuesday seem astounding: Consumer credit fell by (an annualized) $7.48 billion in February, measured against January, far more than expected. Americans clamping down on their credit card spending accounted for the vast majority of the decline.
We could call this the return of the rationally-acting consumer. The worst economic contraction since the Depression has Americans parking their plastic.
But then you learn that credit rose in January by $8.14 billion, apparently as a result of binge buying and travel over Christmas. So the bout of rationality came on rather suddenly. So we should probably wait for March's numbers to draw long-term conclusions.
One question: Consumer spending did not fall in February as fast as consumer credit, which suggests to me an increasingly reliance on out-of-pocket cash to pay for goods and services. As the economy continues to shed more than 600,000 jobs every month, how long can that last?