Outstanding consumer credit declined at an annualized rate of 3.75% in August on a seasonally adjusted basis according to the Federal Reserve Bank of New York.
The monthly decline was the first since January 1998 and only the second since the recession of the early 90s.
Expect the consumer credit pinch to continue as recessions go hand in hand with declines in consumer credit. In the period of December 1990 through June 1992, consumer credit shrank in 13 of the 19 months according to Federal Reserve statistics.
Companies most likely to be affected by slowing consumer credit will be in the durable goods category including cars, furniture and leisure goods. According to Furniture Today, furniture retailers are seeing consumer credit rejections running over 50%, well above the normal 20% rate.
Exchange traded funds that specialize in consumer durables include the Vanguard Consumer Discretionary ETF (VCR). Similar ETFs include the S&P Global Consumer Discretionary Sector Index Fund (RXI), Consumer Discretionary Select Sector SPDR Fund (XLY) and PowerShares Dynamic Consumer Discretionary Sector Portfolio (PEZ).