U.S. Consumer Credit OutstandingContinues To Fall

Consumers continue to deleverage as the prospects for employment remain uncertain. The Federal Reserve reported late Friday that consumer credit outstanding fell for the eighth consecutive month during September. It also was the twelfth monthly decline since summer, 2008. The $14.9B drop from August followed declines during the prior two months which were revised shallower, but the y/y change amounted to a record 4.8% drop.  With these declines, consumers have reduced credit outstanding as a percentage of disposable income to 22.6% from its 2005 high of 24.4%. This compares to the low near 16% in the early-1990s.

Usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, fell $4.9B after a slight August increase. The 2.3% y/y decline was a record. Consumers continued also to cut back on revolving credit usage. During September it fell a near-record $9.9B for the twelfth consecutive monthly drop. Year-to-year the 8.8% decline is by far the record as consumers continued to shy away from liberal spending.

Finance companies (-12.3% y/y), savings institutions (-9.8% y/y), nonfinancial businesses (-6.4%) and commercial banks (-1.5% y/y have seen the largest pullbacks in credit extension while credit unions continue to see positive growth (1.9% y/y). The Federal government and Sallie Mae also continued to lend during September and raised credit outstanding by 23.9% y/y which was the strongest growth rate since early-2001.· 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.

Monetary Policy Stance: The View From Consumption Spending from the Federal Reserve Bank of St. Louis is available here 

In the news today are reports of French business sentiment and industrial production in Germany, Romania, Slovakia and Turkey.

French business sentiment continues to improve.   From the low point of 66.96 reached in December of last year, the Bank of France's Business Sentiment Indicator has risen in each subsequent month and in October was up to 94.80, just 5.20 points below 100, its long term average.  An important factor in the improvement in sentiment has been the increase in new orders--the total and foreign.  The first chart shows the percent balances between those experiencing an increase in total and foreign new orders over those experiencing a decline.  In October, the excess of those experiencing an increase in foreign new orders over those experiencing a decline was 4.85%, while the excess for total orders was 10.9% as shown in the first chart.

The most important report on industrial production released today is that for Germany and it is encouraging.  Industrial production in Germany is up for the second month. While developments in Germany, as the largest economy in Europe, overshadow those in the smaller and less developed economies of Eastern Europe and the Middle East, it is encouraging to see that the representatives of the latter groups in today's news are making strong percentage gains in industrial production.  The month to month changes in production in the emerging countries tend to be volatile even on a seasonally adjusted basis.  The  picture becomes clearer when we aggregate the date on a quarterly basis as can be seen in a comparison of the second and third charts.