ENCINO, CA-The 6.3% decline in consumer credit since July 2008will remain a drag on economic growth and job creation through therest of 2010, according to a new report from Marcus &Millichap. The report by Hessam Nadji, managing director ofresearch services for Marcus & Millichap, points out thatalthough consumption and retail sales have made significant headwaytoward recovery this year, the tighter consumer credit poses aheadwind for the economy.

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"Top-tier borrowers retain access to credit, but theselower-risk consumers continue to impose austerity measures as theyde-leverage in the wake of the recession," the report says. "At thesame time, less creditworthy borrowers have been substantially cutoff from credit due to high levels of lender risk aversion." Evenafter credit becomes more readily available, Nadji's report pointsout, "Consumption will likely continue to lag until employment andincome growth improve sharply, an event not likely to occur untilmid-2011."

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Among the numerous highlights of the report: Total consumercredit outstanding fell 0.1% in July, marking the 20th monthlydecline in the past 22 months. Further, a 0.5% drop in revolvingcredit, which consists almost entirely of credit card debt, fueledthe overall decrease in balances outstanding. With July’s decline,revolving credit has fallen for an unprecedented 22 consecutivemonths, slipping by 15%, or $145.6 billion.

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Among the factors cited for the decline in consumer credit arethe continued de-leveraging by creditworthy borrowers and thedenial of credit to less qualified borrowers, including many whoremain unemployed or under-employed. "In the near term, onlyreinvigorated job growth will encourage a resurgence of lending andborrowing, but substantive hiring remains elusive," the reportsays.

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The impact of this tighter credit on commercial real estate hasbeen to exert pressure on retail and distribution properties, amongother things. The retail vacancy rate rose 2% since late 2008 to10% in the second quarter of 2010 and will climb another 40 basispoints this year to 10.4% as retailers continue to adapt to theweakened retail environment, the report forecasts. In addition,since revolving credit started to decrease in October 2008, thenational industrial property vacancy rate rose 2.7% to 12.7% in thesecond quarter of this year. To read the full report, clickhere.

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