Consumer Credit Increased 9.9% in November 2011

The Federal Reserve's consumer credit report for November 2011 shows a 9.9% monthly increase in consumer credit. Revolving credit increased 8.5%, and nonrevolving credit increased 10.7%. Seems the financial sector said release the Credit Kraken!


consumer credit


The report gives percent changes in simple annualized rates, also known as a continuously compounded annualized rate of change.

You'll see headlines blaring consumer credit soars and is the highest increase in a decade and so on. The truth is, at simple annualized rates, consumer credit increased almost to this level in the last 10 years. Consumer credit, annualized, increased 9.3%, in September 2004, 9.2% in October 2004, 9.2% in February 2002 and 18.2% in November 2001. Below is the graph of the monthly annualized percentage changes in consumer credit going back to 1980.


consumer credit


Overall consumer credit increased $20.4 billion dollars to $2477.7 billion. Revolving credit increased $5.6 billion while non-revolving increased $14.8 billion. Revolving credit are things like credit cards and non-revolving are things like auto loans and student loans. Mortgages are not included in this report.

From the above graph we can see outstanding consumer credit drops correlate to recessions. This report does not include charge offs and delinquencies. While credit card charge offs increased 17 basis points in November, credit card delinquencies hit an all time low. Below is total consumer credit.



The increase was in large part due to student loans. Tuition has soared this fall, 8.3% at public colleges alone. The federal government started making 100% of guaranteed student loans in July 2010. Federal Government non-revolving credit, which includes these student loans, increased $6.4 billion from October to November. People went more into debt, clearly, to pay for the soaring, absurdly high, educational costs. These are aggregates, but it's doubtful that the U.S. population entering into college is directly proportional to these increases.



Below is non-revolving credit, seasonally adjusted, annualized percentage change.


nonrevolving credit


Revolving credit, think credit cards, are also up for November. Commercial banks alone increased revolving credit by $8.8 billion. Here comes charge it.

Below is revolving credit, raw totals. Charge offs are not included in this report. These numbers are seasonally adjusted.



Other press claimed the increase is due to a better economy. Sorry folks, people don't go into more debt unless they have to, although offering up more debt implies banks think people can pay it back.

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Or Maybe They Don't Care if They Pay it Back

Certainly that's the case with student loans. There are essentially no restrictions on borrowing, and with Income Based Repayment almost nobody will every pay it back. Certainly I will likely not be able to since, I found out that the job market wasn't what I expected it to be.

student loans

are now government debt, you have to pay it back. You cannot get out of it, I believe even through bankruptcy you cannot get the loan forgiven.