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Economy in Brief

U.S. Consumer Credit Records First Increase in Year
by Tom Moeller March 08, 2010

Consumer credit outstanding during January posted its first gain in twelve months. Is a bottom to the year-long retrenchment in the making or will debt-laden balance sheets force further cutbacks? The $5.0B gain in credit reported by the Federal Reserve late-Friday was the first monthly increase in a year and reversed December's $4.6B decline. This two-month flattening of credit usage follows a record $23.9B November shortfall. Also a record, year-to-year credit outstanding fell 4.2%. During the last ten years, there has been a two-thirds correlation between the y/y change in credit outstanding and the change in personal consumption expenditures. The January increase contrasted with Consensus expectations for a $4.5B drop.

Increased usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, accounted for the January increase. The $6.6B rise followed a $4.9B December increase. Together they recouped November's drop and since mid-2008 the trend in usage's level has been sideways. Federal government & Sallie Mae lending expanded by more than two-thirds y/y during January. That increase offset an 11.5% decline in pools of securitized assets, a 0.3% slip in commercial bank lending and a 1.2% fall in credit union lending. 

Continued cutting of revolving credit usage in January held back the increase in overall credit usage. It fell $1.7B following much sharper declines through most of 2009. The latest was part of a record 9.6% y/y decline. Versus January 2009 finance companies lowered lending by one-quarter, commercial bank lending fell 10.8%, pools of securitized assets fell 8.8% while savings institutions pulled lending back 1.0% y/y. Loans from credit unions offset some of these declines with a 5.4% 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.

Stressed, Not Frozen: The Federal Funds Market in the Financial Crisis from the Federal Reserve Bank of New York can be found here here

Consumer Credit Outstanding (m/m Chg, SAAR) January December November Y/Y 2009 2008 2007
Total $5.0B $-4.6B $-23.9B -4.2% -4.3% 1.5% 5.7%
  Revolving $-1.7B $-9.4B $-13.7B -9.6% -9.6% 1.6% 8.1%
  Non-revolving $6.6B 4.9B $-10.2B -1.0% -1.1% 1.5% 4.4%
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