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Economy in Brief

U.S. Consumer Credit Increase Is Only Second Of Year
by Tom Moeller   November 08, 2010

There's been a conscious effort by consumers to reduce debt levels this year. And despite Friday's report, it's ongoing. The Federal Reserve indicated that consumer credit outstanding rose $2.1B during September following declines during the prior seven months. The August decline was revised deeper. So far this year, consumer credit, which does not included mortgage debt, has fallen 1.4% on the heels of last year's record 4.4% drop.

Peculiar about the September figure was a $10.4B increase in non-revolving credit outstanding. It was by far the largest increase since January and, like then, it resulted mostly from a spike in borrowing by the Federal government. It's up by three quarters y/y. Other revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total was restrained. Commercial bank lending fell hard m/m but was up 4.5% y/y while finance company credit was off $3.4B (-4.7% y/y). Credit union credit fell $1.3B (-8.0% y/y) while nonfinancial business borrowing slipped $0.4B (-0.9% y/y). Pools of securitized assets slipped but were off by half from last year.

Revolving credit is what consumers still are in a hurry to shed. Outstanding balances fell $8.3B during September and by 8.9% y/y which remained near the -10.2% record set in January. (Prior to 2009, revolving credit had never been negative y/y.) Pools of securitized assets slipped marginally from August but they're off 89.1% y/y. Commercial bank credit fell $8.5B m/m but remained up nearly three quarters from 2009. Finance company lending again held roughly constant m/m (+42.5% y/y) while credit union borrowing also was roughly stable (+3.2% y/y) as was savings institutions credit (+21.2% y/y).

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. 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)
Sept. Aug. July Y/Y 2009 2008 2007
Total $2.1B $-4.9B $-5.4B -2.9% -4.4% 1.5% 5.7%
  Revolving -8.3 -5.0 -5.0 -8.9 -9.6 1.6 8.1
  Non-revolving 10.4 0.1 -0.4 0.5 -1.3 1.5 4.4
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