Consumer Borrowing Up – but Not the Plastic Kind

U.S. consumer credit increased at an annualized rate of 3.75 percent in October. The U.S. banking industry is looking to shed domestic office space while expanding internationally. And Congress is still dithering over whether or not to prolong the cut in payroll taxes.

December 8, 2011
By Dees Stribling, Contributing Editor

Image courtesy Flickr Creative Commons user Images_of_Money

The Federal Reserve reported on Wednesday that U.S. consumer credit increased at an annualize rate of 3.75 percent in October. Most of the increase was due to non-revolving loans, the kind that pays for cars, boats and higher education (but not houses). That category of borrowing was up 5.25 percent, while credit card borrowing and the like was only up at an annualized rate of 0.5 percent.

Consumers have deleveraged considerably from their credit cards, or are being forced to. In 2007, before the onset of the recession and its crummy aftermath, total outstanding U.S. revolving debt was just over $900 billion. The annualized total in October 2011, by contrast, was $794.2 billion, after plastic debt reached a maximum of $989.1 billion in 2009. Card holders are cutting down their charges, and card issuers are cutting some borrowers off.

Total non-revolving loans outstanding, on the other hand, are at a higher level now than they were even in 2006. As of October 2011, the annualized total was $1.67 trillion. In 2006, the total was $1.51 trillion. Much of that increase has been lending from the federal government, which essentially nationalized about 80 percent of the student lending market in 2010. In 2006, the government was the creditor for $91.7 billion in loans, but now the total (as of October 2011) is about $410 billion.

Banks Plan to Use Less Office Space

A Jones Lang LaSalle survey of seven leading U.S. financial services companies has reported that the U.S. banking industry is looking to shed office space domestically in the coming years, while expanding internationally. The “right-sizing” of worker space in the United States, as the study puts it, will be partly achieved partly through “mobility programs” — that is, de-emphasizing a fixed workplace for some employees. The thinking is that communications technology and a generation of workers used to being connected in nontraditional settings will ease the transition to less workspace.

More than 40 percent of respondents expect between 16 to 30 percent of their workforce to be enrolled in a mobility program by 2013, and all of respondents expect to have at least 15 percent of their workforce enrolled in a workplace mobility program by then. While not new, worker mobility programs have recently emerged more strongly as a tactic to lower occupancy costs, increase density and utilization rates, achieve sustainability goals and increase employee productivity, according to Jones Lang LaSalle.

Banks will not be contracting their physical presence in the burgeoning economies of Asia, however. South Asia (primarily India) and North Asia (primarily China) will present the banking sector with the most attractive growth opportunities by 2020, notes the survey.

Still No Payroll Tax Deal

The world’s attention might be on the dysfunction of the euro-zone, but there are still whiffs of dysfunction emerging from the U.S. Congress. Or maybe it’s just good old-fashioned political bickering before a compromise is reached — which would be refreshingly normal, considering the record of the current Congress. The time the issue is prolonging the cut in payroll taxes. Various plans have been bandied about to no effect this week, and there’s talk of Congress not going home for the holidays, which seems unlikely since summer recess was an important motivation in getting Congress to act on the debt ceiling in August.

Wall Street saw another mostly break-even day on Wednesday, almost as if investors were waiting on developments from some foreign shores — those countries east of the U.K. and west of Russia, more than likely — before either panicking or buying with irrational zeal, depending on whether the news was perceived as bad or good. In any case, the Dow Jones Industrial Average was up 46.24 percent, while the S&P 500 gained 0.2 percent. The Nasdaq lost a scant 0.01 percent.