UPDATE 1-US consumer credit unexpectedly falls in Feb

(Recasts, adds analyst comment, graphic)

WASHINGTON, April 7 (BestGrowthStock) – U.S. consumer credit
unexpectedly tumbled in February, reversing the prior month’s
surprise increase, as households refrained from taking on new
debt in favor of deleveraging.

February’s total consumer credit outstanding dropped $11.51
billion or at a 5.62 percent annual rate to $2.45 trillion, the
Federal Reserve said on Wednesday.

January’s figures were sharply revised upward to show a
$10.64 billion increase, previously reported as a $4.96 billion
rise. Analysts polled by Reuters had forecast consumer credit
would rise by $0.5 billion in February.

Analysts said households’ continued reduction of their debt
load was unlikely to have an impact on consumer spending, which
normally accounts for 70 percent of U.S. economic activity.

“But it does point to a lack of confidence on the part of
consumers and their caution may well mean this recovery is
still a fragile one and the Fed is right to be careful about
withdrawing their monetary stimulus,” said Chris Rupkey, chief
financial economist at Bank of Tokyo-Mitsubishi UFJ in New

The Federal Reserve, which pumped money into the economy to
help break the worst downturn since the 1930s, has pledged to
keep benchmark interest rates ultra low to nurture the recovery
that started in the second half of 2008.

Analysts are hopeful that the job market, which has started
to recover, will help to keep consumer spending afloat.

“At the same time though, relative to the last business
cycle, we expect a higher savings rate and less growth in
consumer credit as households return to a more sustainable
financial situation,” said Zach Pandl, U.S. economist at Nomura
Securities International in New York.

Nonrevolving credit, which includes closed-end loans for
expensive items such as cars, boats, college education and
holidays, slipped $2.07 billion, or at a 1.56 percent annual
rate, to $1.59 trillion in February, the Fed said.

Revolving credit, made up of credit and charge cards,
tumbled $9.44 billion, or at a 13.06 percent rate, to $858.15
billion, the data showed.

A report by the American Bankers Association released on
Tuesday showed loan delinquencies fell in the fourth quarter,
marking a second consecutive quarter of improvement.

The association said eight out of 11 categories of consumer
loans saw nonpayments fall, with bank card delinquencies
dropping to 4.39 percent from 4.77 percent in the third

Consumer credit graphic: http://link.reuters.com/hab86j

(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)

UPDATE 1-US consumer credit unexpectedly falls in Feb