Tuesday, December 7, 2010

The Consumer Credit Split

Bloomberg details:

Consumer borrowing in the U.S. unexpectedly rose in October for a second straight month, led by an increase in non-revolving credit, including student loans held by the federal government.

The report showed credit-card debt fell for a 26th consecutive time, showing Americans continue to pay down debt, one reason spending has been slow to recover. Car sales last month climbed to the highest level in a year and holiday purchases have perked up, indicating households may soon start borrowing again.
It looks like non-revolving loans have (for at least the moment) hit bottom, while revolving (i.e. credit card debt) continues to collapse.

Source: Federal Reserve


  1. Thnx for posting!

    The headlines I saw about consumer borrowing rising sharply, or the most in 2 years or whatever (http://www.washingtonpost.com/wp-dyn/content/article/2010/12/07/AR2010120704033.html) were just asinine.

  2. As Denninger points out in Market Ticker, non-revolving's increase is almost exclusively in borrowing for college.

    Sorry, no link, I'm on a mobile device.

    So, a deep dive into the data may give a different picture.

  3. SPECTRE of DeflationDecember 9, 2010 at 6:14 AM

    As Karl D. points out, the gains in non-revolving was all in student loans. Basically, they are making the next generation debt slaves before they even leave school and good luck with a job in your field unless it's highly specialized, and even then it's iffy in this environment. At this point, the clowns of DC and NY will do anything to show any growth in consumer credit.

    My own take is the kids are saying why not go to school for 4 years with someone else's money and party like it's 1999, and then walk away from the debt just like everyone else is doing with consumer loans. You can say you can't walk away from this debt, but mass defaults will overwhelm the system in the same way that bad mortgages and securitizations did with housing.