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Economy in Brief

U.S. Consumer Credit Expansion Led By Credit Cards
by Tom Moeller  July 11, 2011

Consumers seem to have retrieved their credit cards, earlier stowed in the dresser drawer. Reported late Friday, overall consumer credit rose $5.1B during May following a $5.7B April advance, revised down from $6.3B reported last month. A $5.0B increase was expected by Action Economics. Following earlier declines, credit has risen during the last eight months at a 2.3% annual rate (1.0% y/y).

Consumers stopped paying down their revolving credit balances during May. The $3.3B advance was the first gain since December and lessened the y/y decline to 4.4%. Prior to 2009, revolving credit usage had never been negative y/y. Pools of securitized assets dropped 15.6% y/y and commercial bank credit fell 4.4%. Meanwhile, finance company credit rose 5.8% y/y while savings institution credit jumped 16.0%. Credit union lending rose a diminished 2.3% y/y and nonfinancial business credit remained unchanged.

Non-revolving credit, which accounts for nearly two-thirds of the total, rose for the tenth straight month. The weakened $1.8B May increase pulled the y/y change to 3.8%, its strongest since June, 2008. Loans by the Federal government rose by more than two-thirds y/y but finance company lending dropped 7.1%. Commercial bank credit fell 5.8% y/y while saving institutions lending was off 1.1%. Nonfinancial business credit remained unchanged but pools of securitized assts fell 19.3%.

During the last ten years, there has been a 53% correlation between the y/y change in credit outstanding and the change in personal consumption expenditures, although the correlation recently has weakened considerably. The credit figures are the major input to the Fed's quarterly Flow of Funds accounts for the household sector.

The consumer credit data are available in Haver's USECON database. The Action Economics figures are in the AS1REPNA database.

Upstream Capital Flows: Why Emerging Markets Send Savings To Advanced Economies from the Federal Reserve Bank of Dallas is available here.

Consumer Credit Outstanding
(M/M Chg, SAAR)
May Apr Mar Y/Y 2010 2009 2008
Total $5.1B $5.7B $4.3B 1.0% -1.7% -4.4% 1.5%
  Revolving 3.3 -0.8 -0.4 -4.4 -7.5 -9.6 1.7
  Non-revolving 1.8 6.5 4.7 3.8 1.5 -1.3 1.5
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