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

"Top-tier borrowers retain access to credit, but these lower-risk consumers continue to impose austerity measures as they de-leverage in the wake of the recession," the report says. "At the same time, less creditworthy borrowers have been substantially cut off from credit due to high levels of lender risk aversion." Even after credit becomes more readily available, Nadji's report points out, "Consumption will likely continue to lag until employment and income growth improve sharply, an event not likely to occur until mid-2011."

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

Among the factors cited for the decline in consumer credit are the continued de-leveraging by creditworthy borrowers and the denial of credit to less qualified borrowers, including many who remain unemployed or under-employed. "In the near term, only reinvigorated job growth will encourage a resurgence of lending and borrowing, but substantive hiring remains elusive," the report says.

The impact of this tighter credit on commercial real estate has been to exert pressure on retail and distribution properties, among other things. The retail vacancy rate rose 2% since late 2008 to 10% in the second quarter of 2010 and will climb another 40 basis points this year to 10.4% as retailers continue to adapt to the weakened retail environment, the report forecasts. In addition, since revolving credit started to decrease in October 2008, the national industrial property vacancy rate rose 2.7% to 12.7% in the second quarter of this year. To read the full report, click here.