Financial Controls: USA Consumer Credit Increases (Charts) *Revolving credit lowest since August 2004*

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Federal Reserve Statistical Release: Consumer Credit

Official Statement by the Federal Reserve (June 7, 2011) Consumer credit increased at an annual rate of 3 percent in April 2011. Nonrevolving credit increased at an annual rate of 5-1/4 percent, while revolving credit decreased at an annual rate of 1-1/2 percent.

Total Consumer Credit (Chart) Total consumer credit increased in April (preliminary) by +$6.25 billion and +0.26% to $2.43 trillion. The Pre-Great Recession peak was $2.58 trillion in July 2008. The cyclical low was $2.39 trillion in September 2010. Below is a chart of USA total consumer credit from the Pre-Great Recession peak in July 2008 through the latest month reported.

Total Revolving Credit (Chart) Total revolving credit decreased in April (preliminary) by +$943 million and -0.12% to $790.11 million. This is the lowest that USA total revolving credit has been since August 2004 ($787.35 million) and is a Post-Great Recession cyclical low. That is an 80-month low. The Pre-Great Recession peak was $973.64 billion in August 2008. Below is a chart of USA total revolving credit from the Pre-Great Recession peak in August 2008 through the latest month reported.)

Total NonRevolving Credit (Chart) Total nonrevolving credit increased in April (preliminary) by +$7.19 billion and +0.44% to $1.63 trillion. This is the 4th consecutive monthly Post-Great Recession cyclical high. The Pre-Great Recession peak was $1.61 trillion in July 2008. The cyclical low was $1.58 trillion in November 2009. Below is a chart of USA total nonrevolving credit from the Pre-Great Recession peak in July 2008 through the latest month reported.

[Editor's Note] 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.

Commentary

In April 2011, NonRevolving Credit increased for the 9th consecutive month and reached another Post-Great Recession and all-time high, as a result of the inclusion of student loans. Revolving Credit decreased, is at another Post-Great Recession cyclical low, and has decreased 30 of the past 32 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, NonRevolving Credit, and 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 had 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 7 consecutive months (October 2010 through April 2011). Much of this increase is attributable to student loans now being included in NonRevolving Credit, effective September 2010. Revolving Credit set another Post-Great Recession cyclical low in April 2011. 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.