Wednesday, October 7, 2009

Consumer credit continues free fall

Consumer credit outstanding results are not pretty.  Outstanding consumer credit continues falling with neither the first nor second derivative being positive.  As I have mentioned before the rate of decline is unprecidented.   It was World War II the last time consumer credit fell at such a rate and WWII is a pretty good excuse not to go out and borrow more money.  As you can see from the picture (click on it for a larger image) consumer credit before has fallen to a negative growth rate, but only for a short period of time and it quickly turned upwards. 

Since the US consumer is  approximately 70% of US GDP this does not bode well for growth in the near term.


  1. Hey Greg-

    Good post on the consumer credit. I saw somewhere that consumer credit had dropped by about $12billion dollars this year, due in part to the changes in minimum payments on outstanding credit card balances. I know my monthly minimum payments doubled earlier this year.

  2. I have been thinking about the duality of the drop in consumer credit. Is it from banks withdrawing credit lines or from people reducing their use of credit? I don't know the answer but does it really matter? Either way credit is contracting. Mind you the graph shown in the post does not include mortgage debt and is only consumer debt. Corporate debt is much more complex as there are numerous means for them to access credit. (Commerical paper, listed bonds, capital leases, bank loans, etc.)