Showing posts with label consumer credit. Show all posts
Showing posts with label consumer credit. Show all posts
Tuesday, June 12, 2012
Consumer Credit and Consumer Mindset
Changes in consumer credit outstanding provide some additional insight into the mindset of consumers.
After all, confident consumers that see robust economic growth and job creation occurring now and promised into the future are far more likely to borrow for assorted purchases. On the other hand, of course, consumers that are worried about the economy are more likely to stand pat.
For good measure, consumer credit numbers can reflect the state of lending on the financial institutions side. Are banks keeping credit tight? What role might government regulation be playing in the credit picture?
The Fed reported that overall growth (annualized) in consumer credit outstanding slowed to 3.1 percent in April, down from 5.9 percent in March, and down from 5.8 percent growth for the first quarter. The key factor was a 4.8 percent fall off in revolving credit (mainly, credit cards).
Nonrevolving credit certainly suffered during the credit meltdown that started in the latter half of 2008, with a 1.2 percent decline in all of 2009, and then growth slowly resuming in 2010 (2.5 percent) and 2011 (5.7 percent).
But revolving credit saw a much larger and sustained decline – being flat for 2008, and then falling by 8.8 percent in 2009 and 7.4 percent in 2010. It barely edged up by 0.9 percent in 2011.
So far this year, revolving credit was flat in the first quarter, and then we see this decline in April. And the April level actually was below the level as of November of last year.
These latest consumer credit numbers from the Fed do not reflect consumers with high levels of confidence in the economy. Indeed, this data tends to reconfirm other measures already reported, including relatively low levels of consumer confidence and a poor rate of job creation. Throw in ongoing concerns about ramped up government regulation on the financial industry, and the consumer credit numbers should surprise no one.
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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is “Chuck” vs. the Business World: Business Tips on TV.
Thursday, February 09, 2012
Latest Credit Data Shows Life
Contrary to how many people might feel, we have not actually been in a recession since December 2007.
The recession that began at the end of 2007 was one of the deepest and longest on record. But it officially ended in mid-2009. The subsequent recovery, though, has been so poor that it feels like the recession never ended.
The reality of a long-term under-performing economy has meant that banks have been less willing to lend (coupled with increased regulation), at the same time that loan demand has declined and been restrained among both businesses and consumers.
Two indicators reflecting this economic and credit reality are nonrevolving credit and revolving credit.
When the mortgage/credit mess hit in the summer of 2008, consumer credit outstanding dropped dramatically. For nonrevolving credit, that decline lasted to May 2010.
But revolving credit (overwhelmingly credit cards) kept falling through August of 2011.
However, the latest data released by the Federal Reserve on February 7 noted that both nonrevolving and revolving credit increased notably in both November and December.
Nonrevolving credit grew by a seasonally adjusted, annual rate of 10.7 percent in November and 11.8 percent in December.
Revolving credit was up by 8.4 percent in November and by 4.1 percent in December.
Along with the latest employment data, these numbers provide some hope that this anemic recovery might be gaining a bit more strength.
Of course, when things have been so bad for so long, it's easy to get a bit carried away. Keep in mind that since July 2008, nonrevolving credit is only up by 5 percent, and revolving credit is still down by 18 percent over the same period.
The hope that can be found in these latest consumer credit numbers, of course, would only grow and strengthen if policymakers stepped back from excessive taxation and regulation, and if it reined in the subsidies and political games that swirl around so much of the credit market, in particular home mortgages.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.
The recession that began at the end of 2007 was one of the deepest and longest on record. But it officially ended in mid-2009. The subsequent recovery, though, has been so poor that it feels like the recession never ended.
The reality of a long-term under-performing economy has meant that banks have been less willing to lend (coupled with increased regulation), at the same time that loan demand has declined and been restrained among both businesses and consumers.
Two indicators reflecting this economic and credit reality are nonrevolving credit and revolving credit.
When the mortgage/credit mess hit in the summer of 2008, consumer credit outstanding dropped dramatically. For nonrevolving credit, that decline lasted to May 2010.
But revolving credit (overwhelmingly credit cards) kept falling through August of 2011.
However, the latest data released by the Federal Reserve on February 7 noted that both nonrevolving and revolving credit increased notably in both November and December.
Nonrevolving credit grew by a seasonally adjusted, annual rate of 10.7 percent in November and 11.8 percent in December.
Revolving credit was up by 8.4 percent in November and by 4.1 percent in December.
Along with the latest employment data, these numbers provide some hope that this anemic recovery might be gaining a bit more strength.
Of course, when things have been so bad for so long, it's easy to get a bit carried away. Keep in mind that since July 2008, nonrevolving credit is only up by 5 percent, and revolving credit is still down by 18 percent over the same period.
The hope that can be found in these latest consumer credit numbers, of course, would only grow and strengthen if policymakers stepped back from excessive taxation and regulation, and if it reined in the subsidies and political games that swirl around so much of the credit market, in particular home mortgages.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.
Friday, December 09, 2011
Consumer Credit: End of Spiral
It appears that the three-year, near-death spiral in consumer credit has finally come to an end, according to the latest data from the Federal Reserve released on December 7.
Nonrevolving consumer credit had hit bottom in May of last year, and inched up unevenly over the past year-plus. But it's also worth noting that nonrevolving credit has been stagnant over the past three months.
Meanwhile, revolving credit - overwhelmingly credit cards - continued to slide effectively until August of this year, though the dissent slowed and was uneven over the last several months.
Revolving credit has grown for two straight months and in four of the last six months. Yet, the October level was still below the July 2011 level, and was far below the all-time high hit in September 2008.
Consumers obviously are still reining in debt and do not feel confident about jobs and the economy. This, of course, continues to limit the performance of small businesses, especially on the retail end of things.
This also partially reflects restrained start-up business activity, which often gets funded through the use of credit cards.
But even if consumer credit is just bouncing along the bottom or at least starting a slow climb up, it's a better sign for the economy than the long freefall experienced over much of the past three years. Now, hopefully, the question turns to the rate of recovery.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.His new book is titled "Chuck" vs. the Business World: Business Tips on TV.
Nonrevolving consumer credit had hit bottom in May of last year, and inched up unevenly over the past year-plus. But it's also worth noting that nonrevolving credit has been stagnant over the past three months.
Meanwhile, revolving credit - overwhelmingly credit cards - continued to slide effectively until August of this year, though the dissent slowed and was uneven over the last several months.
Revolving credit has grown for two straight months and in four of the last six months. Yet, the October level was still below the July 2011 level, and was far below the all-time high hit in September 2008.
Consumers obviously are still reining in debt and do not feel confident about jobs and the economy. This, of course, continues to limit the performance of small businesses, especially on the retail end of things.
This also partially reflects restrained start-up business activity, which often gets funded through the use of credit cards.
But even if consumer credit is just bouncing along the bottom or at least starting a slow climb up, it's a better sign for the economy than the long freefall experienced over much of the past three years. Now, hopefully, the question turns to the rate of recovery.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.His new book is titled "Chuck" vs. the Business World: Business Tips on TV.
Friday, June 10, 2011
The Fed's Latest Consumer Credit Numbers
The Federal Reserve released the latest data on consumer credit outstanding on June 7. In April, total consumer credit grew 3.1 percent. But the two types of credit were going in different directions.
Nonrevolving credit, which as the Fed notes, "includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations," increased by 5.3 percent.
After declining from January 2009 to May 2010, nonrevolving credit has expanded in 11 of the last 12 months, and for nine straight months.
Bloomberg News reported, "The increase in borrowing from commercial banks and credit unions in April probably reflected growing demand for autos that has since dropped off as fuel prices climbed."
Others highlighted the impact that the bad economy has had on borrowing for education. Reuters noted: "‘What appears to be a turnaround in the credit cycle is mostly an increase in student loan debt as people go back to school to improve skills amid high unemployment and as state budget cuts push up tuition,' Wells Fargo Securities said."
In terms of revolving credit - mainly credit cards - the falloff has been deeper and it has persisted. Revolving credit declined by 1.4 percent in April. That was the third decline out of the first four months of 2011, with revolving credit falling in 30 of the past 32 months.
In April 2011, consumer credit outstanding (seasonally adjusted) had fallen to roughly the same level it was at in August 2004.
The main story here is that consumers continue to lack confidence, and therefore, are keeping a tight rein on spending and are reducing outstanding credit card debt. This is not surprising given the underperforming recovery, including very poor job creation.
And until the public policy agenda shifts in a pro-growth direction - including lower tax rates, less regulation, free trade, smaller government, and sound money - a lackluster, uneven recovery will persist.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
Nonrevolving credit, which as the Fed notes, "includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations," increased by 5.3 percent.
After declining from January 2009 to May 2010, nonrevolving credit has expanded in 11 of the last 12 months, and for nine straight months.
Bloomberg News reported, "The increase in borrowing from commercial banks and credit unions in April probably reflected growing demand for autos that has since dropped off as fuel prices climbed."
Others highlighted the impact that the bad economy has had on borrowing for education. Reuters noted: "‘What appears to be a turnaround in the credit cycle is mostly an increase in student loan debt as people go back to school to improve skills amid high unemployment and as state budget cuts push up tuition,' Wells Fargo Securities said."
In terms of revolving credit - mainly credit cards - the falloff has been deeper and it has persisted. Revolving credit declined by 1.4 percent in April. That was the third decline out of the first four months of 2011, with revolving credit falling in 30 of the past 32 months.
In April 2011, consumer credit outstanding (seasonally adjusted) had fallen to roughly the same level it was at in August 2004.
The main story here is that consumers continue to lack confidence, and therefore, are keeping a tight rein on spending and are reducing outstanding credit card debt. This is not surprising given the underperforming recovery, including very poor job creation.
And until the public policy agenda shifts in a pro-growth direction - including lower tax rates, less regulation, free trade, smaller government, and sound money - a lackluster, uneven recovery will persist.
_______
Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.
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