U.S. consumer credit edges fell much less than expected in May

• Total US consumer credit fell by unexpectedly by $3.23 billion in May. 
• May consumer credit outstanding fell at a 1.5% annual rate to $2.5196 trillion from 2.5229 trillion in April as the US recession crimped borrowing.
• Analysts had forecast consumer credit to decline by $9.5 billion in May compared with April’s drop which was revised to show a record decline of $16.52 billion.  This was previously reported as a $15.7 billion fall.

"The figures show recession, but recession going to a period of stabilization, and then improvement," said Marshall Front, chairman of Front Barnett Associates LLC in Chicago.

• With credit card defaults at record highs, companies are slashing lending limits and closing accounts to curb losses.
• Non-revolving credit which includes closed-end loans for big-ticket items like cars, boats, college education and holidays, fell $400 million, or at a 0.3% annual rate.
• Revolving credit, made up of credit and charge cards, decline $2.9 billion, or at a 3.7% rate.

"The era of free money is over and consumers have a lot of debt balance sheet clean-up to perform," said Lindsey Piegza, analyst at FTN Financial in New York.

• Analysts expect the rate of industrywide losses from credit cards to peak at 12 percent to 14 percent in 2010, up from 10 percent now, pushing annualized losses close to $100 billion.
• The industry may not be profitable again until 2011

Source: Reuters