Consumer Credit Increases For First Time Since February 2009

Econintersect has a lot of “buts” but agrees with the Federal Reserve that consumer credit expanded in March 2011.  The first “but” is the amount of increase.  The second “but” is that the growth is on the backs of our young in the form of student loans.

Consumer credit increased at an annual rate of 3 percent in March, 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.

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.

After 2 years of contraction, consumer credit has expanded 0.06% year-over-year.  At the current rate of change, in about one year consumer credit will be growing at historical levels.

A bigger ‘but” is that the growth is student loans.

If student loans are ignored – consumer credit is contracting 6.6% YoY.  Econintersect pointed out that Professor Paul Krugman is arguing “if we want a society of broadly shared prosperity, education isn’t the answer” (analysis here).

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.

So there it is.  For me, the “buts” have it.  Consumer credit “growth” is in the eye of the beholder.

3 replies on “Consumer Credit Increases For First Time Since February 2009”

  1. We have seen, as have you and [email protected], that there has been a significant increase in auto loans and student loans. It appears that you backed out students, but not autos, except for possibly your 3rd graph’s “non-revolving” (in the?) red line.

    If “revolving credit” is basically “credit cards”, one must ask: “What if you backed out the increased cost of gas that we charge?” Or, are “gas cards” not included in that FedR number? Is this Visa and MC gas, or Hexxon BP gas, or both?

    Do you have any info on how much the revolving decline is “bad loan charge offs”? Other reports suggest that, while it has been over 10% over the last two year, that it has declined to just under that now. So, is your decline the lack of use, or lack of existence/opportunity?

    Do you know how the “student loan” numbers are annualized? Is there a beginning school year bump, a quarter bump, a semester bump; or is this “seasonally adjusted”?

    Disirregardless, very well done Steve.

  2. JGB……
    the Fed does not breakout credit use.

    the only reason i can break out student loans is that the good ole USA government is literally issuing all this paper – and no other forms of consumer credit. The government is broken out as a separate issuer of paper.

    i can find no current info on “bad loan chargeoffs”. this is a real good question – and the data is not in the Fed database. if i can uncover this i will come back and post in this comment stream.

    the student loan data is unadjusted (not seasonally adjusted) – and like everything has seasonal characteristics. larger draws are in august, september and october – and are at their lowest levels during the early summer.

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