Those analysts waiting for the American consumer to return to the malls and rescue the economy with a burst of credit fueled spending will have to wait a good deal longer. Consumers are still reducing their debt exposure despite eleven months of expanding GDP. Consumers added a paltry $1 billion to their outstanding debt in April, reducing their revolving accounts by $8.5 billion and increasing their non-revolving by $9.4 billion. Real estate transactions are excluded from these figures. A net reduction of $1.0 billion had been expected in a survey of 32 economists by Bloomberg; the five year monthly average is $3.5 billion.

The positive April however, was swamped by negative revisions to March, February and January: the March result went to -$5.4 billion from $2.0 billion; February to -$7.7 from -$6.2 billion; January to $3.3 billion from $6.5 billion. Over these three months consumers deducted an additional $12.1 billion from their net outstanding credit than had been previously recorded.

This report, released by the Federal Reserve at 3:00 pm, may have contributed to the sell-off in equities, which intensified ten minutes after the issuance. The Dow closed at 9816.49 only five points from the low, suffering a loss of 115.48 points.

Joseph Trevisani

Chief Market Analyst

FX Solutions