AT&T Warn of Consumer Softness

The US Housing market collapse has not spread to the broader economy. This is the mantra still blindly repeated on Wall Street despite mounting evidence to the contrary. Yesterday AT&T provided added to the growing gins that things are not as contained as the so-called experts would have us believe. From Bloomberg:

AT&T Drops Most in 5 Years on Consumer 'Softness'

AT&T Inc. dropped the most in almost five years in New York trading after Chief Executive Officer Randall Stephenson said slowing economic growth led to "softness" in the home-phone and Internet businesses.

The shares fell 4.6 percent, helping to spark a broader decline in U.S. stocks, after Stephenson said San Antonio-based AT&T is disconnecting more phone and high-speed Internet customers who failed to pay their bills.

"We're really experiencing softness on the consumer side of the house from the economy," Stephenson said today at an investor conference in Phoenix.

The disconnections in the residential-phone business, which accounts for about a fifth of sales, have put more pressure on Stephenson, who became CEO in June. Last year, he relied on the popularity of wireless handsets such as Apple Inc.'s iPhone to fuel growth, helping to make up for losses of home-phone customers.

As mentioned here previously, as consumers cannot access the built in ATM on their front lawns any more many will turn to other forms of credit. Yesterday's consumer credit report confirms that this is the case.

U.S. consumer borrowing rose more than forecast in November as Americans used credit cards and auto loans to add to a record amount of debt, Federal Reserve statistics showed.

Consumer credit increased $15.4 billion for the month to $2.51 trillion, the Fed said today in Washington. In October, credit rose $2 billion, less than the previously reported gain of $4.7 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans.

The figures suggest Americans are relying more on credit cards and other short-term borrowing to maintain spending after the collapse in subprime lending made bank loans harder to get. An increase of 133,000 U.S. jobs in November and December was the lowest for those two months since 2002 and disposable incomes aren't keeping pace with inflation.

The fun is just beginning, wait until unemployment really tanks. Credit card delinquincies are already rising and will only get worse as the cash strapped Ameerican consumer finds it tougher and tougher to keep up their spending habits.