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Economy in Brief

U.S. Consumer Credit Usage Decline Reaches Historic Proportion
by Tom Moeller January 11, 2010

Is the consumer not attempting to borrow or is credit not being extended by the lender? It's hard to say but the Federal Reserve reported late-Friday that consumer credit outstanding fell by a record $17.5B m/m during November following a $4.2B October decline that was revised slightly deeper from the initial report. The latest was the fourteenth monthly drop since summer 2008. Moreover, the 3.9% y/y pullback in credit outstanding set another historic record as consumers retrenched and took account of debt-laden personal balance sheets along with job market deterioration. Consumer credit outstanding as a percentage of disposable income fell to 22.1% from its 2005 high of 24.7%. Nevertheless, these rates remain up from the low near 16% in 1992.

Usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, fell $3.8B after a $3.2B October increase. The 0.6% y/y decline reflected a 13.2% drop in pools of securitized assets, an 11.2% decline in finance company lending and a 7.2% drop in nonfinancial business credit extensions. These were mostly offset by the federal government & Sallie Mae which expanded lending by more than two-thirds y/y and commercial bank lending which rose 1.1%. The latter figure, however, was down from 13% growth early in 2008.

Revolving credit usage fell a record $13.7B during November as part of a pullback that began late in 2008. The latest was part of a 9.3% y/y decline which also was by far a record. Versus November 2009, finance companies lowered lending by 37.9%, commercial bank lending fell 9.8%, pools of securitized assets fell 5.8%, savings institutions pulled back 3.9% y/y. Loans from credit unions offset some of these declines with a 6.2% increase.

These figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector.

Credit data are available in Haver's USECON database. The Flow of Funds data are in Haver's FFUNDS database.

Why Are Banks Holding So Many Excess Reserves? from the Federal Reserve Bank of New York is available here here

Consumer Credit Outstanding (m/m Chg, SAAR) November October September Y/Y 2008 2007 2006 
Total $-17.5B  $-4.2B $-8.9B -3.9% 1.6% 5.6% 4.1%
  Revolving $-13.7B $-7.3B $-8.0B -9.3% 1.9% 7.8% 5.0%
  Non-revolving $-3.8B $3.2B $-1.0B -0.6% 1.4% 4.4% 3.6%
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