Consumer credit keeps rolling downhill.

Earlier this month the Fed released the consumer credit data for May.  Total consumer credit keeps rolling downhill with no sign of slowing down.  I've included a longer term year over year chart as well as a more recent graph showing total consumer credit outstanding.

As you can see from this longer term year over year chart a sustained decline in lending has not occurred since this data series began at the end of World War II.  This is just one example of how this recession is different than all other post WWII slowdowns.

Looking at graph #2 for a shorter time period one again sees the steady decline in consumer credit.  Compare this to the early 90's where consumer credit levelled off but did not decline. 

In my opinion until the employment numbers start to seriously improve and home prices start creeping upwards we are going to see continued declines in consumer credit and thus sluggish growth (at best) in the overall economy.

Source: Federal Reserve

Consumer credit continues dropping

Consumer credit continues falling.  The rate of decline appears to have stabilized but this means consumer credit continues to contract with no anticipated point of stabilitzation.

Longer term a deleveraged consumer is good news.  Getting there is not pleasant, whether it be from consumer paydowns or bank writing off debts.  As I have mentioned before the decline in consumer credit and debt prevents a strong recovery.  Not only is the added impulse of new debt (and thus spending) missing but the additional drag of debt reduction is still present.

After the inventory bounce recedes in the next 2 quarters GDP growth will remain muted in my opinion.

Consumer credit keeps contracting faster

Consumer credit data came out about 2 weeks ago and the numbers are not getting any better.  Unlike my previous entries showing the very long term I thought I'd zoom in a little to show you how this recession is unlike anything we've seen in the last 40 years.  Consumer credit keeps going down and the rate of declining is increasing.  Call this an anti-'green shoot'.

The economy will not properly recover and the Federal Reserve will most likely not raise interest rates too much (if at all) until consumer credit and bank lending start rising.  Until then, get used to very low short term rates.

Consumer credit, where art thou?

Consumer credit (consumer loans excluding home loans) was released today.  Consumer credit continues to contract further and faster.  Unlike my previous posting I have extended the graph back to the beginning of the data series so you can see the extent of the current decline in context.

Since World War II at worst consumer credit levelled off for a period of time before resuming its ascent.  Not this time.  While you may not be able to see it, the current rate of decline is getting worse each month and shows no sign of at least slowing down.