Banks Lead Consumer Credit Expansion

Recently released data from the Federal Reserve Board shows that seasonally adjusted consumer credit outstanding rose by 7.25% in December 2013 to $3.1 trillion. Revolving credit, which is composed of credit cards, grew by 7.0% while non-revolving credit, largely composed by student loans and auto loans, increased by 7.4%.

Over the year of 2013, growth in consumer credit accelerated by 0.1 percentage point to 6.2% from 6.1% in 2012. Growth in revolving credit accelerated to 1.9% in 2013, from 0.4% in 2012 while growth in non-revolving credit, which occurred at a higher rate, decelerated in 2013 to 8.0% from 8.7% in 2012.

An earlier post illustrated that lending standards on consumer loans, excluding prime mortgages, eased on net at large depository institutions in the fourth quarter of 2013. The not seasonally adjusted consumer credit data indicates that the easier lending standards at depository institutions reported earlier coincided with growth in the amount of consumer credit outstanding from this major holder. According to the release, depository institutions are the largest holder of consumer credit outstanding, accounting for 41.1% of consumer credit outstanding in the fourth quarter of 2013. Figure 1 illustrates that growth in consumer credit issued from depository institutions was highest among all major consumer credit holders.

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According to the chart, consumer credit outstanding at depository institutions rose by 3.8% in the fourth quarter of 2013, 1.4 percentage points greater than the 2.2% growth rate in not seasonally adjusted consumer credit outstanding over the 4th quarter of 2013. Consumer credit from the federal government, which is largely composed of student loans, rose by 2.4% over the quarter. Meanwhile, growth in consumer credit outstanding at credit unions, nonfinancial businesses, and pools of securitized assets grew less than the total growth in the 4th quarter of 2013. Consumer credit outstanding at finance companies was virtually unchanged over the quarter while at nonprofits and educational institutions, growth in consumer credit outstanding declined.



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