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Economy in Brief

Credit Cards Pocketed; The Frugal U.S. Consumer
by Tom Moeller January 8, 2009

U.S. consumer credit usage dropped during November for the third month in the last four. The Federal Reserve reported that consumer credit outstanding fell $8.0 billion m/m after a $2.8B October decline that was slightly shallower than reported initially. On a percentage basis, credit outstanding over the last three months fell at a 0.6% annual rate which was the largest decline since 1992.

Annualized, credit growth averaged 8% during the fifteen years ended 2007. Over an even longer period that increase does not loom particularly large. However, against an average 5% growth in disposable income during those years, it precipitated a rise in the ratio to disposable income to 24% from a longer term norm of 17%. The credit cards are now being put away, certainly with the weakness in the labor market.

Non-revolving credit, which accounts for nearly two-thirds of total consumer credit, dropped sharply for the third month in the last four. The whopping $5.2B m/m drop was near the largest on record and it reduced annualized growth during the last three months to -0.9%, the weakest since 1992. That followed a 4.4% rise last year.

Revolving credit outstanding fell $2.8B during November. This dropped the three-month growth in credit card usage to -0.1%. That was down from the 7.4% growth last year and it was the weakest since the recession year of 2001.

These figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector. For 4Q08 the data will be released later this month.

These data are available in Haver's USECON database.

The Budget and Economic Outlook: Fiscal Years 2009 to 2019 from the Congressional Budget Office can be found here.

Consumer Credit (m/m Chg, SAAR) November October Y/Y 2007 2006  2005
Total $-8.0B  $-2.8B 2.3% 5.5% 4.5% 4.3%
  Revolving $-2.8B $0.0B 4.0% 7.4% 6.1% 3.1%
  Non-revolving $-5.2B $-2.8B 1.2% 4.4% 3.6% 4.9%
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