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Economy in Brief

U.S. Credit Card Payoffs Reduce Consumer Credit Outstanding Again
by Tom Moeller   October 7, 2010

Consumers remain on their quest to reduce debt levels. The Federal Reserve reported that consumer credit outstanding fell $3.3B during August following declines during the prior six months. Coupled with larger drops late last year, the 3.1% y/y decline is just slightly less than last year's record 4.4% drop.

Again, leading the way was a $5.0B drop in revolving credit outstanding. Modest gains in consumer spending suggest limited usage of credit cards for purchases. They're being used less, however, to carry a balance. The 8.8% y/y decline in revolving credit outstanding was near the -10.2% record set earlier this year. (Prior to 2009, revolving credit had never been negative y/y.) Pools of securitized assets led the decline and were one-fifth of their peak. Finance company lending again held roughly constant m/m (+39.3% y/y) while commercial bank lending fell for the fifth month (+78.5% y/y) after a March surge. Loans from credit unions were roughly stable (+4.1% y/y) as was lending by savings institutions (+23.1 y/y).

Usage of non-revolving credit (autos & other consumer durables), which accounts for nearly two-thirds of the total, rose for the fourth straight month. The $1.6B monthly increase turned the y/y change minimally positive after a 1.3% 2009 decline. The August increase was led by a $26.3B increase in loans from the Federal Government, up nearly three-quarters y/y. Commercial bank lending reversed the July increase but was up 6.2% y/y. Pools of securitized assets fell another $2.0B and were off by one-half y/y. Finance company lending fell $4.3B (-4.3% y/y) but credit union lending ticked up $0.4B (-6.9% 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.

IMF Urges Global Cooperation To Meet 4 Key Challenges from the International Monetary Fund is available here.

Consumer Credit Outstanding
(m/m Chg, SAAR)
August July June Y/Y 2009 2008 2007
Total $-3.3B $-4.1B $-1.8B -3.1% -4.4% 1.5% 5.7%
  Revolving -5.0B -5.0 -5.2 -8.8 -9.6 1.6 8.1
  Non-revolving 1.6 0.9 3.4 0.2 -1.3 1.5 4.4
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