Sunday, April 10, 2011

USA Consumer Credit Increases in February (Charts) *Revolving credit at 77-month low*

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Federal Reserve Statistical Release: Consumer Credit


Official Statement by the Federal Reserve (April 7, 2011) Consumer credit increased at an annual rate of 3-3/4 percent in February 2011. Nonrevolving credit increased at an annual rate of 7-3/4 percent, while revolving credit decreased at an annual rate of 4 percent.

Total Consumer Credit (Chart) Total consumer credit increased in February (preliminary) by a large +$7.6 billion and +0.32% to $2.42 trillion. This was the largest increase since June 2008 (+$9.3 billion). Total consumer credit:
Increased for the 5th consecutive month, after 20 consecutive monthly decreases (from February 2009 through September 2010)
Peaked in July 2008 at $2.58 trillion and the Great Recession low was in September 2010 at $2.39 trillion


Total Revolving Credit (Chart) Total revolving credit decreased in February (preliminary) by -$2.7 billion and -0.34% to $794.0 billion. This is a new cyclical low, the lowest since September 2004 ($793.86 billion) which was 77 months ago. Total revolving credit:
Has increased once since September 2008, in December 2010
Has decreased 29 of the past 30 months
● Peaked in August 2008 at $973.6 billion and is now at a new cyclical low of $794.0 billion (preliminary)
 is the current January 2011 (preliminary) amount of $795.5 billion.


Total NonRevolving Credit (Chart) Total nonrevolving credit increased in February (preliminary) by +$10.3 billion and +0.64% to $1.63 trillion. This is a Post Great Recession cyclical high and the largest increase since October 2010 (+11.4 billion). Total nonrevolving credit:
Increased for the 7th consecutive month
Increased 8 of the past 9 months
At all-time high, exceeding Pre-Great Recession peak in July 2008 at $1.61 trillion
Cyclical low was in November 2009 at $1.583 trillion


Commentary

Effective with the September 2010 data, the law changed and the US federal government is the primary lender to students. Previously, the US federal government had been the guarantor of student loans and private lenders provided the credit. Some of the increase in NonRevolving Credit can be attributed to increased student loans by the government.

In February 2011, NonRevolving Credit increased for the 7th consecutive month and reached another Post-Great Recession and all-time high, as a result of the inclusion of student loans. Revolving Credit decreased and reached another Post-Great Recession low and has decreased 29 of the past 30 months. NonRevolving Credit data is now including student loans which makes comparisons difficult without modifying the data. However, the increase in NonRevolving Credit is an encouraging indicator for USA economic growth.

As can be seen from the charts above and was so noted, USA Total Consumer Credit, Total NonRevolving Credit, and Total Revolving Credit, i.e. consumer debt, peaked in July and August 2008 (The Great USA Credit Bubble) and then generally downtrended.  The decrease in Revolving Credit has generally been greater than the increases in nonrevolving credit resulting in a general decrease in total consumer credit for most of 2010 and that trend began reversing later in 2010.

Currently, Total Consumer Credit reached a Post-Great Recession cyclical low in September 2010 and has now increased 5 consecutive months (October 2010 through February 2011). Much of this increase is attributable to student loans now being included in Total NonRevolving Credit, effective September 2010. Total Revolving Credit set another Post-Great Recession cyclical low in February 2011. Total NonRevolving Credit reached a Post-Great Recession cyclical low in November 2009 and has exceeded the Pre-Great Recession cyclical peak in July 2008.

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 2011 or certainly not as much credit. In addition, consumer uncertainty regarding the future plus the 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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