According to the Federal Reserve, November 2011 consumer credit increased at an annual rate of 10.0%. Revolving credit increased at an annual rate of 8.5%, while nonrevolving credit increased at an annual rate of 10.75%.
Econintersect spends time on this generally ignored data series as the USA is a consumer driven economy. One New Normal phenomenon is the consumer shift from a credit towards a cash society – a quantum shift which changes the amount of consumption. Watching consumer credit provides confirmation that this New Normal shift continues.
The Econintersect summary of the data based on the November 2011 releases:
|Year-over-Year Growth Rate||Change in rate of growth from Previous Month||Trend|
|Total Credit||3.14%||0.73%||three month and a general six month improving trend|
|Revolving credit||0.03%||1.1%||first YoY improvement in years|
|Non-revolving credit||4.7%||0.5%||14 out of last 15 months with positive growth|
If student loans are backed out, consumer credit expanded month-over-month at an annual rate of 8.8% – but is down 1.2% year-over-year.
Econintersect backs out student loans as they are currently consuming an unusual and inordinate portion of USA consumer loans.
Note: Student Loans have never declined during this period. Where student loans are shown at 100% of the growth, consumer credit (including student loans) declined in that particular month even though student loans outstanding increased.
A good background article was written by Frederick Sheehan.
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.
There was a pause in the expansion of consumer credit in August – but the growth continued in September, October, and November. It is student loans which has been literally the entire growth of consumer credit – although in November 2011, student loans were only 30% of the of consumer credit.
This was the largest growth of consumer credit since September 2008.
Caveats on the Use of Consumer Credit
This data series does not include mortgages, and is not inflation adjusted.
The graph below shows consumer credit outstanding (this data series does not include mortgages) is slightly less than 23% of annualized consumer spending – down from a high of over 26% in the 2000s, but still above the averages before the mid 1990s.
To get a feel of inflation adjusted consumer credit, the following graph is inflation adjusted consumer credit using the CPI-U – this is expressing consumer credit in 1982 dollars.
Econintersect believes consumer credit levels are now nearing historical channels.