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Saturday, October 9, 2010

USA Total Consumer Credit Decreases in August (Charts) *7th consecutive monthly decline*

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USA revolving credit in August decreased for the 24th consecutive month


USA Total Consumer Credit Decreases in August

Official Statement The Federal Reserve reported, "In August, total consumer credit decreased at an annual rate of 1-3/4 percent. Revolving credit decreased at an annual rate of 7-1/4 percent, and revolving credit increased at an annual rate of 1-1/4 percent."

Total Consumer Credit (Chart) Total consumer credit decreased in August by -$4,585M or -0.19% to $2,414,282M. This was the 7th consecutive monthly decrease. Total consumer credit peaked in July 2008 at $2,581,858M and the current August amount is the cyclical bottom to-date, down -$167,576M and -6.49% from the peak. The chart below shows the latest 60 months (5 years) of total outstanding consumer credit.



Total Revolving Credit (Chart) Total revolving credit decreased in August by -$5,584M or -0.67% to $822,249M. This was the 24th consecutive monthly decrease. Total revolving credit peaked in August 2008 at $973,644M and the current August amount is the cyclical bottom to-date, down -$151,395 and -15.55% from the peak. Total revolving credit has decreased every month since the peak. The chart below shows the latest 60 months (5 years) of total outstanding revolving credit.



Total NonRevolving Credit (Chart) Total nonrevolving credit increased in August by +$998M or +.06% to $1,592,033M. This was the 4th consecutive monthly increase. The cyclical peak was in July 2008 at $1,609,285M and the cyclical trough was in November 2009 at $1,582,855M. The current August amount is down -$17,252M and -1.07% from the July 2008 cyclical peak and up +$9,178M and +0.58% from the November  2009 cyclical trough. Therefore, the current August amount is closer to the cyclical bottom than the peak. The chart below shows the latest 60 months (5 years) of total outstanding nonrevolving credit.




Commentary

As can be seen from the charts above and was so noted, USA Total Consumer Credit, Total Revolving Credit, and Total  NonRevolving Credit, consumer debt, peaked in July and August 2008 (The Great USA Credit Bubble) and has generally downtrended (total consumer credit and total revolving credit) or been flat (nonrevolving credit) since. The decrease in revolving credit has been greater than the recent increases in nonrevolving credit resulting in a decrease in total consumer credit. Nonrevolving credit increased for the 4rd consecutive month, but the increases have not offset the revolving credit decreases for the past 24 consecutive months..

While reports say consumers are deleveraging, i.e. paying off their debt, it should also be noted that banks have tightened lending standards. Therefore, some consumers who could  have borrowed (and spent) as recently as the first half of 2008 cannot obtain credit in 2010 or certainly not as much credit. In addition, consumer uncertainty regarding the future plus the current high unemployment and underemployment rates have lowered loan demand. Since consumer spending, consumption, is a significant portion  of the USA economy (60%+ of GDP), all of these factors slow down the USA economic (GDP) growth.


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