Consumer Credit Update (2011 June)

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 any increases in that category is attributable to student loans because of the near impossibility of discharging them in bankruptcy.

I intend to report these updates monthly. This first one is important because I covered the topic of increasing nonrevolving debt relative to GDP recently.

First, the revised first quarter 2011 numbers are in. Link here to the preliminary ones. I only republished the Fed’s annualized growth rates, which are imprecise.

2010 Q4 r 2011 Q1 p 2011 Q1 r
Total $2,407.3 bln 2.1% $2,425.5 bln 3.0% $2,421.9 bln 2.4%
Revolving $800.6 bln -3.1% $796.1 bln -2.3% $791.1 bln -4.8%
Nonrevolving $1,606.7 bln 4.7% $1,629.4 bln 5.6% $1,630.9 bln 6.0%

The good news is revolving debt (which is almost exclusively credit card debt) contracted more than in the preliminary estimate. Unfortunately, nonrevolving debt increased faster than in the preliminary estimate. 6.0% is a lot, and worse, it’s accelerating on a quarterly basis.

Government holdings of nonrevolving debt did not change, and all other holders of nonrevolving debt still saw a decrease between February and March.

Here’s what we get in April.

2011 Q1 revised 2011 April preliminary
Total $2,421.9 bln 2.4% $2,428.2 bln 3.1%
Revolving $791.1 bln -4.8% $790.1 bln -1.4%
Nonrevolving $1,630.9 bln 6.0% $1,638.1 bln 5.3%

As for holdings of nonrevolving debt, only two holders’ quantities increased (annualized rates are mine):

March April (preliminary) Annualized Increase
Commercial Banks $481.9 bln $487.3 bln 14.3%
Government $355.2 bln $359.4 bln 15.1%

This is a big change in direction for commercial banks, which had seen their holdings decline starting first quarter 2010. Government holdings did not increase by as much as in the past. I predict it will tick upwards later in the summer when new student loans will be issued per the Direct Loan program, which superseded the guaranteed loan program mid-2010.

Contrast all this with the BLS’s Employment Situation release, which reported a net growth of 54,000 jobs in May 2011. More debt in April; few jobs in May. Not good.

2 comments

  1. The economy is going to be like this for some time because the sort of drastic action which saved the US in the 1st Great Depression is off the table, because Washington is staffed with retards.

    If you speak Chinese, or Russian, or even dorky otaku Japanese, flee the country now.

  2. Increase due to technical reasons — transition from FFEL to DL. FFEL is poorly measured by the Fed’s 1930s-era methodology, while DL is easily tracked.

    [Net increase is net increase. The Fed’s methodology is a different issue.]

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