American consumers in March decided to slow their rate of borrowing on their credit cards. This caught economists by surprise.
In February, they borrowed $18.6 billion. That looked as though the recovery was taking hold. But in March, they hit the brakes: $7.97 billion.
“Estimates of the 31 economists surveyed by Bloomberg ranged from gains of $11 billion to $20 billion.” They did not see this coming.
Revolving credit actually fell.
Why? One explanation is higher Social Security taxes. Another is limited income growth. But both of these had been known by economists, who missed the call.
Personal spending was up by 0.2%. In February, it was up by 0.7%. This was a major slowdown.
What about incomes? They decreased by 0.2%. They had been up by 1.1% in February.
Americans sense that it’s time to cut back on spending. They do not do this when they see times as good. They do this when they are getting scared.
One month’s figures are not a trend, but they can announce a trend. This is not yet austerity, but it’s pointing that way.