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Last week, the Federal Reserve reported that revolving consumer credit had risen 7.4% from the same period last year. Outstanding credit card debt hit $937.5 billion.

Floyd Norris notes the significance of the recent trends in credit card indebtedness:

"AMERICAN credit card debt is growing at the fastest rate in years, a fact that may signal coming trouble for the banks that issue them...

The annual growth rate has now been over 7 percent for three months running, the first such stretch since 2001, when a recession was driving up borrowing by hard-pressed consumers.

The surge in credit card borrowing comes as credit card default rates are gradually rising, albeit from low levels, and may reflect the fact that it has become harder for consumers to borrow against the value of their homes, both because home values have fallen in many markets and because mortgage lending standards have tightened."

The chart tells all: (click for larger chart)

graphic courtesy of NYT

With that as our context, consider these two headlines:

Economy Hit As Consumers Tighten Belts [WSJ]

U.S. Will Escape Recession, Economists Say in Survey [Bloomberg]

While it's possible they can both be right -- slowing consumer brings growth down to marginally positive, but not recessionary -- I have a sneaking suspicion they both won't be right.

Which one do you think will be correct...?

Recently:
How Good Were Holiday Sales Really? http://bigpicture.typepad.com/comments/2008/01/how-good-were-h.html

Real Holiday Spending Was Negative in 2007 http://bigpicture.typepad.com/comments/2007/12/holiday-spendin.html

Sources:
Some Debt Trends Are Good. This Isn’t One of Them.
FLOYD NORRIS
NYT, January 12, 2008
http://www.nytimes.com/2008/01/12/business/12charts.html

Economy Hit As Consumers Tighten Belts
JUSTIN LAHART and KELLY EVANS
WSJ, January 12, 2008; Page A1
http://online.wsj.com/article/SB120009796448585205.html

U.S. Will Escape Recession, Economists Say in Survey
Shobhana Chandra and Alex Tanzi
Bloomberg, Jan. 9 2007
http://www.bloomberg.com/apps/news?pid=20601087&sid=aEX73qWiBrb4&

Source: Consumer Debt & Spending