Financial Controls: USA Consumer Credit Jumps to Post-Recession High! (Charts) *Revolving credit drops*

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Federal Reserve Statistical Release: Consumer Credit

Statement by the Federal Reserve (September 8, 2011) Consumer credit increased at an annual rate of 6 percent in July 2011. Revolving credit decreased at an annual rate of 5-1/4 percent, while nonrevolving credit increased at an annual rate of 11-1/4 percent.

Total Consumer Credit (Chart) Total consumer credit increased in July 2011 (preliminary) by very strong +$11.97 billion and +0.49% from the prior month to $2.454 trillion. This is a Post-Great Recession cyclical high and the 10th consecutive monthly increase. This is the largest monthly increase since April 2008 (+$13.41 billion). The Pre-Great Recession peak was $2.581 trillion in July 2008. The Great Recession cyclical low was $2.394 trillion in September 2010. Student loans were added to nonrevolving credit in September 2010 (see Editor's Note further below).

Total Revolving Credit (Chart) Total revolving credit decreased in July 2011 (preliminary) by -$3.44 billion and -0.43% from the prior month to $792.48 billion. This is a 3-month low and the largest monthly drop since January 2011 -+$5.57 billion). The Pre-Great Recession peak was $972.20 billion in September 2008. The Great Recession cyclical low was $790.30 billion in April 2011.

Total NonRevolving Credit (Chart) Total nonrevolving credit increased in July 2011 (preliminary) by a very strong +$15.41 billion and +0.94 from the prior month to $1.662 trillion. This is another Post-Great Recession cyclical high, an all-time high, and the 14th consecutive monthly increase. The Pre-Great Recession peak was $1.610 trillion in July 2008. The Great Recession cyclical low was $1.582 trillion in November 2009. Student loans were added to nonrevolving credit in September 2010 (see Editor's Note below).

[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 July 2011, Total Consumer Credit reached another Post-Great Recession high of $2.454 trillion and has increased 10 consecutive months. NonRevolving Credit increased impressively for the 14th consecutive month and reached another Post-Great Recession and all-time high. Revolving Credit decreased to a 2-month low and has decreased 30 of the past 34 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.

USA Total Consumer Credit, NonRevolving Credit, and Revolving Credit, i.e. consumer debt, peaked in July and September 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.

Total Consumer Credit reached a Post-Great Recession cyclical low in September 2010 and has now increased 10 consecutive months (October 2010 through June 2011). Some of this increase is attributable to student loans now being included in NonRevolving Credit, effective September 2010. Revolving Credit set a 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 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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