The management at American Express (NYSE: AXP) must have hoped that its relatively high-end card holders might dodge much of the economic slowdown. It was not to be. According to The Wall Street Journal, "the card company said yesterday that it would take a $440 million pretax charge against fourth-quarter earnings as it sets aside more money to cover soured loans." The news and a warning from Capital One (NYSE: COF) showed that credit problems have moved beyond the mortgage market and into consumer credit.
American Express described its problems as "broad-based and sudden." So, part of the financial industry says the consumer pulled in very sharply in December, a sign that GDP may have already begun shrinking at the end of last year.
The consumer was the economy's last, best hope. He was needed to drive revenue in the retail and consumer goods markets. It appears now that his hibernation has begun in earnest.
Douglas A. McIntyre is an editor at 247wallst.com.
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