Global| Mar 07 2011U.S. Consumer Credit Expands But The Mix Diverges
by:Tom Moeller
|in:Economy in Brief
Summary
A firmer job market is encouraging consumers to take on more debt, but this time it's not business as usual. During January consumer credit expanded by $5.0B after a revised $4.1B increase during December. Credit has risen strongly [...]
A firmer job market is encouraging consumers to take on more debt, but
this time it's not business as usual. During January consumer credit
expanded by $5.0B after a revised $4.1B increase during December. Credit
has risen strongly during the last four months following declines from
2008 through 2010. The difference this time, however, is that the
Federal government is the big player.
Holding of non-revolving credit, which accounts for nearly two-thirds of the total, rose firmly for the fifth straight month. The $9.2B monthly increase turned the y/y change positive by 1.6% following a 1.5% increase last year. The January increase was led by a $26.3B increase in Federal Government debt, up nearly three-quarters y/y. To the downside, pools of securitized credit fell by nearly one-half while commercial bank credit was off 4.0%. Saving institutions credit was off by 3.6%, credit union credit fell 3.8% and finance company borrowing fell 3.1% y/y. Nonfinancial business credit fell a lesser 1.3%.
Recent, moderate gains in consumer spending have not come, however, with a run-up in revolving consumer credit which fell $4.2B during January. Since January 2009 credit has fallen during every month for a total decline of 18.6%. During the last twelve months alone, credit is down 7.2%. Prior to 2009, revolving credit had never been negative y/y. Pools of securitized assets led the decline with an 89.5% y/y drop. To the upside, commercial bank credit rose three quarters y/y, finance company credit rose one-half as did savings institution credit. Credit union credit rose 1.4% and nonfinancial business credit was unchanged.
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.
Improving the International Monetary and Financial System is Friday's speech by Fed Vice-Chair Janet L. Yellen and it can be found here.
| Consumer Credit
Outstanding (m/m Chg, SAAR) |
Jan | Dec | Nov | Y/Y | 2010 | 2009 | 2008 |
|---|---|---|---|---|---|---|---|
| Total | $5.0B | $4.1B | $1.3B | -1.4% | -1.7% | -4.4% | 1.5% |
| Revolving | -4.2 | 2.0 | -3.7 | -7.2 | -7.6 | -9.6 | 1.7 |
| Non-revolving | 9.2 | 2.1 | 5.1 | 1.6 | 1.5 | -1.3 | 1.5 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
More Economy in Brief
