Tuesday, October 13, 2009

Consumer Credit: Supply vs. Demand

In response to my post on Consumer Credit, an anonymous reader asks:

Is it possible to determine whether the decline in consumer credit is due to consumers voluntarily paying down their credit, or to banks providing less of it? Consumers paying down their credit cards seems infinitely less scary than banks refusing to lend.
I can't find data related to actual paydowns (if anyone has it, let me know), but here is some data that shows the measure of supply / demand according to historical senior loan officer surveys (smoothed over 12 months).

It looks like there has been a lack of demand for consumer credit since late 2003, thus the need for easier and wider availability of credit. It has only been since late 2007 / early 2008 that supply has become constrained.

Source: Federal Reserve