Financial Controls: USA Consumer Credit Increases (Charts) *Revolving credit rises above 77-month low*

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Federal Reserve Statistical Release: Consumer Credit

Official Statement by the Federal Reserve (May 6, 2011) Consumer credit increased at an annual rate of 3 percent in March 2011, with revolving and nonrevolving credit increasing at a similar rate. In the first quarter, consumer credit also increased at an annual rate of 3 percent.

Total Consumer Credit (Chart) Total consumer credit increased in March (preliminary) by +$6.2 billion and +0.25% 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 increased in March (preliminary) by +$1.95 billion and +0.25% to $796.10 billion. This is above the cyclical low of $794.15 billion last month, February 2011. That was the lowest since September 2004 ($793.86 billion) which was 77 months previously. 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 March (preliminary) by +$4.07 billion and +0.25% to $1.63 trillion. This is a Post Great Recession cyclical high. The Pre-Great Recession peak was $1.609 trillion in July 2008. The cyclical low was $1.583 trillion in September 2010. 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 March 2011, NonRevolving Credit increased for the 8th consecutive month and reached another Post-Great Recession and all-time high, as a result of the inclusion of student loans. Revolving Credit increased and is above the February 2011 cyclical low and has decreased 29 of the past 31 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 6 consecutive months (October 2010 through March 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, but increased in March 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.