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Notes to myself, possibly of interest to others.
-- Bill Northlich

Friday, April 8, 2011

On Consumer Credit

Invictus via Ritholtz 4/8/11.  No link provided, so post provided here in entirety. 
The Fed released its G.19 report on Consumer Credit yesterday, and it stirred some optimism (see also here):
The new U.S. consumer credit numbers reflect an economy that is reaccelerating, and that is very bullish for growth — as well as inflation. All in all, U.S. household credit surged by $7.62 billion in February, ramping up faster than at any other time since June 2008.
I respectfully beg to differ.  While the story gives a passing nod to the rise in student loans, the fact of the matter is that student loans is virtually the whole story, and the downward trend/trajectory in credit, save that category, has really not reversed.
Let’s have a look:
What we’ve got above is Total Revolving, Total Non-revolving, and Total Non-revolving minus TOTALGOV, the category that includes student loans.  Without the increase in student loans — which is to say the green line and the blue line — the trend in credit continues downward.
But let’s take a look at exactly how much the TOTALGOV series is goosing non-revolving credit:
It is, quite literally, a reverse cliff-dive.
In short, fade the notion that consumer credit is experiencing some sort of credit renaissance and that happy days are here again.

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