Why is everyone saying consumer credit is falling? It’s not.

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But, everywhere I look, everybody is saying it is.

I would like to be true to the data and not just take the government’s seasonally-adjusted numbers at face value.

Judge for yourself. Here’s the data:

This is what everyone is focused on – the seasonally-adjusted data. The part in red shows consumer credit down $12 billion.

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consumer-credit-2009-sa

But, what about the actual unadjusted data?

 

consumer-credit-2009-nsa

What do you know, it’s up $7 billion. It is indeed down $4 billion for revolving credit as banks are cutting credit card limits. But, non-revolving credit is up over $11 billion.  It was decreasing and is down 4.4% year-on-year (see the section highlighted in green above), but that ended this month.

Yes, I too believed that consumers were poised to begin deleveraging, but with stocks up 60%, interest rates at record lows, and house price declines stalled, why would you do that?

Conclusion: consumer credit is increasing, not decreasing. I wish people would actually look at the data.

The question you should be asking is not whether consumer credit is increasing, but whether it will continue to do so after August and cash for clunkers.

Sources

G.19 Current – Federal Reserve

G.19 Historical – Federal Reserve

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