Consumer Credit Update (2011 August)

It’s the fifth business day of the month, which means the Federal Reserve has updated its G.19 Release, its estimate of outstanding consumer credit. One problem the U.S. economy faces is that consumer credit is growing faster than the economy. While the G.19 Release doesn’t quantify how much nonrevolving debt is student debt, it is very likely that most increases in that category are attributable to student loans because of the near impossibility of discharging them in bankruptcy. Link here for my analysis of increasing nonrevolving debt relative to GDP.

This month, the Fed provides us with preliminary second quarter 2011 numbers. These are seasonally adjusted.

2010 Q1 r 2011 Q1 r 2011 Q2 p
Total $2,421.9 bln 2.4% $2,419.9 bln 2.1% $2,446.1 bln 4.3%
Revolving $791.1 bln -4.8% $790.6 bln -5.0% $798.3 bln 3.9%
Nonrevolving $1,630.9 bln 6.0% $1,629.2 bln 5.6% $1,647.8 bln 4.6%

Q2 is more a story of credit card debt. Here are the June numbers.

 2011 April r 2011 May r 2011 June p
Total $2,425.5 bln 2.8% $2,430.6 bln 2.5% $2,446.1 bln 7.7%
Revolving $789.8 bln -1.3% $793.1 bln 5.0% $798.3 bln 7.9%
Nonrevolving $1,635.8 bln 4.8% $1,637.5 bln 1.3% $1,647.8 bln 7.6%

Yikes. June was a bad month for consumer credit growth. Here’s the non-seasonally adjusted numbers by holder in billions of dollars. We find that government holdings drive growth, accounting for most of the net increase.

May (revised) June (preliminary) Numeric Change Annualized Increase
Total NRV $1,629.7 $1,637.6 $7.9 6.0%
Government $364.9 $370.1 $5.2 18.5%
Commercial Banks $487.5 $490.4 $2.9 7.4%
Finance Companies $430.0 $431.2 $1.2 3.4%
Credit Unions $185.8 $184.9 -$0.9 -5.7%
Savings Institutions $37.0 $37.0 $0.0 0.0%
Nonfinancial Business $44.7 $44.9 $0.2 5.5%
Pools of Securitized Assets $79.7 $79.2 -$0.5 -7.3%

Increase in government holdings of nonrevolving credit decelerated slightly from May, when it grew at a 20.0% annualized rate, and in Q2 it increased at a 17.9% annualized rate, which is a lot better than Q1’s 58.8% rate. According to the BEA, real economic output grew at a 0.4% annualized rate in Q1 2011, and 1.3% in Q2.

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