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business newsDecember 2011 Consumer Credit: Much Less Than Meets the Eye
By
Peter Atwater
Feb 09, 2012 10:10 am
Consumer deleveraging continues despite what the financial pundits suggest.
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At the risk of raining on their parade, let’s walk through the numbers – and by numbers I mean the “un-seasonalized” numbers. I don’t know about you, but in a secular period of deleveraging I don’t know what seasonal even means anymore.
First, government student loans continued their Icarus-like flight to the sun. For December 2011, $8.8 billion of the $33.1 billion total increase in consumer credit (27%) came from student loan borrowing; and for the year student lending overall was up more than 34% from December 2010. How and when this rise ends, I don’t know; but it is just not sustainable. So is consumer credit growing? Yes. Should this part of consumer credit be growing at 34% year-on-year? That’s a whole different question.
Second, revolving credit balances (principally credit cards) rose $19.6 billion for the month (almost 60% of the total). As noted late last year, credit card usage was up significantly this Christmas versus 2010. But I’d note that based on the weekly data from the Federal Reserve, the entire balance growth from December 2011 has already repaid by January 25. So while consumers used their cards more, it looks to me like they were quick to pay it back. From what I can see consumer deleveraging (and commercial, for that matter) continues despite what the financial pundits suggest.
Finally, the last segment, non-revolving credit ex government (principally auto loans) showed a $4.7 billion increase for the month. This is the only area where I think there is anything significant in the report. Unfortunately, the Fed data makes it is hard to distinguish whether the cause was a big year-end push by the automakers and/or rising used car prices and the need for American consumers to replace their increasingly aging fleet. Either way, I think it says much less about banks’ willingness to lend and consumers’ desire to borrow than consumers’ real need for new wheels.
Is it sustainable? Time will of course tell, but I’d note that the resurgence in auto loan demand coupled with a Time magazine cover story in December 2011 entitled How America Started Selling Cars Again suggests that folks should not get too excited.
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