Consumer Credit Grew Slightly October 2011, Mostly Student Loans

According to the Federal Reserve, October 2011 consumer credit increased at an annual rate of 3.75%. Revolving credit increased at an annual rate of 0.5%, while nonrevolving credit increased at an annual rate of 5.25%.

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 to cash society – a quantum shift which changed the amount of consumption.  Watching consumer credit provides confirmation that this New Normal shift continues.

The Econintersect summary of the data based on the October 2011 releases:

Year-over-Year Growth Rate Change in rate of growth from Previous Month Trend
Total Credit 2.42% 0.6% two month and a general six month improving trend
Revolving credit -1.2% 0.5% years of less bad trendline
Non-revolving credit 4.2% -0.2% one month less good but 13 months of positive growth

If student loans are backed out, consumer credit expanded slightly at an annual rate of 0.28%.

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 and October. It is student loans which has been literally the entire growth of consumer credit.

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 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.

Econintersect believes consumer credit levels are now nearing its historical channels.

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