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Economy in Brief

U.S. Consumer Credit Retrenchment Eases
by Tom Moeller May 10, 2010

Consumers have backed away from reducing debt as rapidly as during last year. The Federal Reserve reported late-Friday that consumer credit outstanding rose $2.0B during March following a revised $6.0B February drop. That decline was half the amount reported last month, suggesting that consumers are more confident about spending. Despite this seeming stabilization in credit outstanding, the 3.4% y/y decline ending in March remained a near record. 

Cutting the usage of revolving credit remained in the forefront of consumers' pullback. A $3.2B March decline followed a $6.0B drop and left usage down a near-record 8.8% y/y. Pools of securitized assets led with a sharp m/m (-84.7% y/y drop. Finance companies, however, countered and increased lending 29.3% y/y due to a one month March spike. Commercial bank lending also jumped in March and was up by three- quarters from last year.  Loans from credit unions rose 6.2% y/y while lending by savings institution increased 4.7%.

Usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, actually rose $5.2B after the $0.2B February slip. Non-revolving credit had fallen modestly during the recession, but has been relatively stable for a year.  Year-to-year figures ending in March show that Federal government & Sallie Mae lending expanded by nearly three-quarters while commercial bank lending also rose 6.6%. These gains were offset a nearly one-half decline in pools of securitized assets, a 12.9% fall in savings institutions, a 4.3% decline in finance companies and a 3.1% fall in credit union lending.

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.  Moreover, 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. 

Consumer Credit Outstanding (m/m Chg, SAAR) March February January Y/Y 2009 2008 2007
Total $2.0B $-6.2B $6.5B -3.4% -4.4% 1.5% 5.7%
  Revolving $-3.2B $-6.0B $-4.3B -8.8% -9.6% 1.6% 8.1%
  Non-revolving $5.2B $-0.2B $10.8B -0.2% -1.3% 1.5% 4.4%
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