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Wednesday, November 10, 2010

USA Total Consumer Credit Increases in September (Charts) *Revolving credit down 25th consecutive month*

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USA revolving credit decreased in September for the 25th consecutive month


USA Total Consumer Credit Increases in September

Official Statement The Federal Reserve reported, "Consumer credit declined 1-1/2 percent at an annual rate in the third quarter. Revolving credit declined 8-3/4 percent at an annual rate, and nonrevolving credit increased 2-1/2 percent. In September, consumer credit increased 1 percent at an annual rate."

Total Consumer Credit (Chart) Total consumer credit increased in August by +$2,145M or +0.09% to $2,411,714M. This was the first increase after 7 consecutive monthly decreases. Total consumer credit peaked in July 2008 at $2,581,858M and the current September amount is the first increase since January 2010. The cyclical bottom to-date was August 2010 and the current September amount is down -$170,143M and -6.6% from the peak and up +$2,145 and +0.09% from the bottom. The chart below shows the latest 27 months of total outstanding consumer credit, beginning with the cyclical peak in July 2008.


Total Revolving Credit (Chart) Total revolving credit decreased in September by -$8,259M or -1% to $813,939M. This was the 25th consecutive monthly decrease. Total revolving credit peaked in August 2008 at $973,644M and the current September amount is the cyclical bottom to-date, down -$159,705 and -16.4% from the peak. Total revolving credit has decreased every month since the peak. The chart below shows the latest 26 months of total outstanding revolving credit, beginning with the cyclical peak in August 2008.



Total NonRevolving Credit (Chart) Total nonrevolving credit increased in September by +$10,404M or +.66% to $1,597,775M. This was the 5th 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 September amount is down -$11,510M and -0.72% from the July 2008 cyclical peak and up +$14,920M and +0.94% from the November  2009 cyclical trough. Therefore, the current September amount is closer to the cyclical bottom than the peak. The chart below shows the latest 27 months of total outstanding nonrevolving credit, beginning with the cyclical peak in July 2008.



Commentary

In September 2010, nonrevolving credit increased for the 5th consecutive month while revolving credit decreased for the 25th consecutive month. However, this time nonrevolving credit increased more than the decrease in revolving credit which resulted in an overall increase in total consumer credit. This is a positive for economic growth.

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 increases in nonrevolving credit resulting in a general decrease in total consumer credit for most of 2010.

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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