Consumer Credit Expands At 6% Annual Rate in July 2011

According to the Federal Reserve, July 2011 consumer credit increased at an annual rate of 6%.  Revolving credit decreased at an annual rate of 5-1/4%, while nonrevolving credit increased at an annual rate of 11-1/4%.

Econintersect review of the non-seasonally adjusted data confirms the Fed’s 6% annual growth rate for consumer credit, with an annual growth rate of 4.7% if student loans are excluded.  However, revolving credit is growing (not contracting) at an annual rate of 4.8%.

Either way, consumer credit is continues to expand faster than GDP growth rate, under 1% so far this year.

[click to enlarge]

Econintersect backs out student loans as they are currently consuming an unusual and inordinate portion of USA consumer loans.  A good background article was written by Frederick Sheehan which included the following graphic:

The Fed uses seasonally adjusted numbers. When you have a major event, say the mother of all recessions – seasonal adjustment methodology simply yields the wrong interpretation. After a major event – it is better to use year-over-year change as the yardstick.

The Federal Reserve reports credit divided between revolving and non-revolving. The majority of revolving credit is from credit cards, while non-revolving credit includes automobile loans, student loans, and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations.

It is clear consumer credit is expanding in this economic cycle.  It is interesting it is happening in a period many are claiming we have re-entered a recession.

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