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Economy in Brief

Consumer Credit Usage Weak But Total Liabilities Strong
by Tom Moeller October 11, 2004

Consumer credit outstanding fell $2.4B in August following an $11.2B spike in July. Year-to-year growth in consumer credit of roughly 4% was depressed as individuals shifted borrowing to lower interest rate, home equity lines of credit.

In August, revolving credit outstanding fell $3.4B (1.8% y/y) and usage of nonrevolving credit was up a modest $0.9B (4.8% y/y). Total consumer credit accounts for just 15% of total credit owed by individuals.

According to the Federal Reserve's broader Flow of Funds Accounts, total credit owed by individuals surged 8.8% y/y through 2Q04. The strength was driven by 11.9% growth in mortgage debt on nonfarm homes (55% of individuals' total liabilities) and also by 7.0% growth in mortgage debt excl. homes (12% of individuals' total). "Other liabilities" rose 7.8% y/y and are 16% of individuals' liabilities.

The ratio of individuals' assets to liabilities was 2.27 in 2Q versus 2.31 last year and a peak of 3.38 in 1999. Since 1999, assets rose at a 1.6% annual rate while liabilities surged at a 9.2% annual rate per year.

Consumer Credit Outstanding Aug July Y/Y 2003 2002 2001
Total $-2.4B $11.2B 3.7% 4.3% 4.2% 8.0%
  Revolving $-3.4B $5.6B 1.8% 2.1% 1.4% 6.6%
  Nonrevolving $0.9B $5.7B 4.8% 5.6% 5.9% 9.0%
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