Falling Consumer Debt – Short term Pain Long term Gain

Falling Consumer Debt – Short term Pain Long term Gain

Pacifica Partners’ Financial Post Weekly Column – Sept 10th 2009


It is said that the hallmark of a bull market is its ability to shrug off seemingly bad news and continue to scale the “wall of worry”. The current bull market’s ability to do this must impress even the most pessimistic of forecasters. Yesterday, the markets were once again challenged with the news that consumer debt levels in the US fell far more than expected. To a market that is looking overvalued by some metrics, any hesitation in economic growth would not be taken too kindly. At current levels, anything less than a strong economic bounce back would be a cause for concern.

The reason that this development is significant is that the global economy needs consumers to start to open their wallets again. In particular, the US consumer is key to the economy given that US consumers account for about 16% of the global economy. Instead, markets were greeted with the announcement that American debt owing on credit cards and consumer loans fell a shocking $21.6 billion in July – five times analyst expectations. It also marked the sixth straight month that outstanding consumer debt declined. Part of the reason that the market was able to take it in stride might be due to the fact that some consumers put off borrowing until August in order to take advantage of the “cash for clunkers” program for new automobile purchases.

To read the rest of this article please visit the Financial Post online: FP Magazine Daily

Pacifica Partners are weekly columnists for the Financial Post

Legal Disclaimer

This report is for information purposes only and is neither a solicitation for the purchase of securities nor an offer of securities. The information contained in this report has been compiled from sources we believe to be reliable, however, we make no guarantee, representation or warranty, expressed or implied, as to such information’s accuracy or completeness. All opinions and estimates contained in this report, whether or not our own, are based on assumptions we believe to be reasonable as of the date of the report and are subject to change without notice. Past performance is not indicative of future performance. Please note that, as at the date of this report, our firm may hold positions in some of the companies mentioned.

Copyright (C) 2009 Pacifica Partners Inc. All rights reserved.

View All
Start a Conversation