Excluding Student Loans – Consumer Credit Expanding 1% in May 2011

Finally there is real expansion in consumer credit in May 2011.  In prior months, there was expansion only in student loans causing the consumer credit data to appear like it was expanding.

It may be hard to tell optically, but the red line in the above chart is uptrending at an annual rate of 1% between April and May 2011.  This data is NOT seasonally adjusted.

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 headlines from the press release:

Consumer credit increased at an annual rate of 2-1/2 percent in May 2011. Revolving credit increased at an annual rate of 5 percent, and nonrevolving credit increased at an annual rate of 1-1/4 percent.

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.

This month non-revolving credit expanded whether you consider student loans or not.

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