Consumer Credit Dead, as US economy goes limp

In a striking reversal, US consumer credit growth has effectively flatlined. After posting a massive $18 billion rise the previous month, the latest data shows just $363 million in new consumer credit — a virtual standstill. This dramatic slowdown hints at a much deeper shift in economic sentiment, as households pull back on borrowing amid higher costs of living, stubborn inflation, and rising unemployment pressures.

A cooling credit market often signals that consumers are tightening their belts — choosing to pay down debt rather than spend. While that may sound like good news for financial stability, it’s a red flag for growth. The US economy is heavily reliant on consumer spending, which accounts for around two-thirds of total GDP. When credit dries up, so does momentum. Fewer car loans, reduced card spending, and slowing personal finance activity all ripple through the retail and service sectors, eventually weighing on corporate profits and employment.

The Federal Reserve will be watching closely. A collapse in credit expansion like this often points to waning consumer confidence, and can act as an early indicator of recessionary pressure. It could also influence the Fed’s next move on rates — possibly accelerating the case for future rate cuts to re-stimulate demand.

For precious metals, this kind of economic stagnation tends to be bullish. Investors typically rotate into gold and silver when consumer and corporate debt expansion halts, seeking safety in tangible assets as financial markets wobble. Gold remains perched near record highs, and silver continues to show relative strength — both feeding off the growing sense that the US economy has lost its pulse.

If credit remains this lifeless for another month, policymakers might not be asking how to slow inflation anymore — but how to reignite growth itself.