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Driving to College: American Consumer Credit

Posted by Joseph Trevisani on Jun 7, 2013 3:00:00 PM

Consumer debt accelerated in April led by increases in automobile and college tuition loans.

Overall credit grew $11.1 billion on the month, according to the Federal Reserve, less than the $12.9 forecast by economists in the Bloomberg survey. The March total was revised up to $8.4 billion from $7.9 billion.

Non-revolving or term debt, that is borrowing with a set term of repayment like loans for college, automobiles or other large purchases, grew $10.4 billion in April. Revolving debt, primarily credit cards, increased $682.3 million following a $906.4 million decrease in March.

Since the financial crisis consumers have been circumspect in their use of credit card debt.  In the five years before the crash year of 2008, consumers added an average of $4.2 billion dollars in new debt every month. In the 52 months since December 2008 consumers have reduced their indebtedness an average of $2.9 billion per month.

Though the large repayments of 2009 and 2010 have subsided, consumers remain cautious, adding only an average of $147 million a month in debt in 2011 and $279 million last year. So far this year the average has been $999 million.

Non-revolving debt has seen an explosion in the past year and a half as a weak job market has kept students in school or returning for more education and consumers have finally begun to replace aging cars kept in use far longer than in the past.

From 2003 through 2007 term debt grew $4.7 billion a month. In 2009 consumers reversed and decreased their exposure by $1.47 billion a month.

In 2010 expansion resumed at $4.5 billion a month, and that pace rose to $7.64 in 2011. But in 2012 non-revolving debt exploded to $12.43 billion a month and that rate has been maintained this year with an average of $11.96 billion in new term debt in each of the first four months of this year.

 Joseph Trevisani

Chief Market Strategist

WorldWideMarkets

Charts: Bloomberg

ScreenHunter 1272 Jun. 07 17.02

ScreenHunter 1273 Jun. 07 17.03

ScreenHunter 1274 Jun. 07 17.04

 

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