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Economy in Brief

U.S. Consumer Credit Usage Rebounds Again
by Tom Moeller   December 08, 2010

The consumer has started borrowing again but credit cards remain stashed away. The Federal Reserve indicated that consumer credit outstanding rose $3.3B during October after a downwardly revised $1.3B September increase. The gains follow steady declines dating back to 2008. So far this year, consumer credit, which does not included mortgage debt, has fallen 2.0% on the heels of last year's record 4.4% drop.

The October increase was led by a $9.0B 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 half y/y. Other non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total was restrained. Finance company lending fell $26.0B (-6.25 y/y) while commercial bank lending again fell m/m but was up 3.4% since last December. Credit union credit ticked up $0.8B (-6.5% y/y) while nonfinancial business borrowing slipped $0.2B (-2.4% y/y). Pools of securitized assets ticked down again m/m but were off by half from last year.

Revolving credit is what consumers still are in a hurry to shed. Outstanding balances fell $5.6B during October and by 9.6% y/y which remained near the -10.2% record set in January. (Prior to 2009, revolving credit had never been negative y/y.) Commercial bank credit fell $5.1B m/m but remained up nearly three quarters from 2009. Pools of securitized assets were unchanged from September but they're off 88.8% y/y.  Finance company borrowing ticked up m/m (43.4% y/y). Credit union borrowing again was stable m/m but up a greatly reduced 3.2% y/y. Borrowing from savings institutions rose slightly but it's up by one quarter from last year.

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)
Oct. Sept. Aug. Y/Y 2009 2008 2007
Total $3.3B $1.3B $-5.0B -3.1% -4.4% 1.5% 5.7%
  Revolving -5.6 -8.8 -5.3 -9.6 -9.6 1.6 8.1
  Non-revolving 9.0 10.1 0.3 0.5 -1.3 1.5 4.4
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