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Economy in Brief

U.S. Consumer Credit Decline Reverses Earlier Gain
by Tom Moeller April 8, 2010

Consumer borrowing continued its retrenchment during February. Consumer credit outstanding fell $11.5B, reversing a revised $10.6B January increase which was much larger than reported last month. The Federal Reserve reported late-Wednesday that the resultant 4.0% y/y decline in credit outstanding remained near the record. During the last ten years, there has been a 60% correlation between the y/y change in credit outstanding and the change in personal consumption expenditures.

Usage of revolving credit was cut sharply. The $9.5B drop followed a modest January increase and left usage down a near-record 9.1% y/y. Versus February 2009, finance companies lowered lending by 14.3%, commercial bank lending fell 12.7%, pools of securitized assets fell 7.4%. Loans from credit unions offset some of these declines with a 6.5% increase while savings institution raised lending 1.6%.

Increased usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, fell a moderate $2.0B following a sharp $9.1B January gain. The 1.1% y/y decline is clearly modest relative to the cutback in revolving credit and it has been stable at that rate since the middle of last year. Federal government & Sallie Mae lending expanded by nearly three-quarters y/y during February. That increase offset a 14.5% decline in pools of securitized assets, a 13.7% fall in savings institutions, an 11.8% decline in finance companies, a 2.8% fall in credit union lending and a 0.1% downtick in commercial bank lending.

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

Consumer Credit Outstanding (m/m Chg, SAAR) February January December Y/Y 2009 2008 2007
Total $-11.5B $10.6B $-7.5B -4.0% -4.4% 1.5% 5.7%
  Revolving $-9.5B $1.5B $-9.4B -9.1% -9.6% 1.6% 8.1%
  Non-revolving $-2.0B $9.1B $1.9B -1.1% -1.3% 1.5% 4.4%
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