Consumer Credit Expands On Auto, Student Loans


Data released by the Federal Reserve Board indicates that consumer credit continued to expand in July, albeit at a slower pace than in the recent past. According to the Federal Reserve’s G.19 survey, consumer credit outstanding grew at a seasonally adjusted annual rate of 4.4% and now stands at $2.9 trillion. However, the growth in consumer credit outstanding recorded in July was 0.7 percentage points less than the 5.1% growth rate recorded in June and 2.4 percentage points less than the 6.8% growth rate recorded in May.

The expansion in consumer credit reflects a rise in non-revolving credit, but the growth rate in non-revolving credit slowed over the month. An earlier post illustrated that non-revolving credit is largely composed of auto and student loans. In July, non-revolving credit outstanding grew by 7.4%. However, the July growth rate of non-revolving credit was 2.0 percentage points slower than the growth rate recorded in June.

The rise in non-revolving credit was partially offset by a decline in revolving credit. This is the second consecutive month that revolving credit, which is largely made up of credit cards, fell. However, the rate of decline in July was smaller than the rate recorded in June. According to the release, revolving credit declined by a seasonally adjusted annual rate of 2.6%. In June, revolving credit fell by 5.2%.

Household debt data from the Federal Reserve Bank of New York indicates that historically, the amounts of credit card and auto loan debt outstanding were roughly similar. According to Chart 1, in the first quarter of 2003, the FRBNY estimated $641 billion in auto loans outstanding and $688 billion in credit card debt outstanding. By the first quarter of 2011, following the boom and bust experienced in the U.S. economy, auto loans outstanding totaled $706 billion while credit card loans equaled $696 billion. However, since the first quarter of 2011, the amount of auto loans outstanding has begun to increase while the level of credit card debt outstanding continues to decline. In the second quarter of 2013, the latest data available, auto loans outstanding had risen to $814 billion while credit card debt outstanding had fallen to $668 billion.


A previous post illustrated that the decline in credit card debt outstanding reflects a decrease in both the number of open credit card accounts and in the average amount outstanding. Conversely, both the number of auto loans and the average loan amount are climbing, but the average loan amount has risen more. The growth in the number of accounts and in loan size reflects consumers’ ability and willingness to finance car purchases. %. In contrast, the observed increase in mortgage demand is not being met with easier lending standards, holding back a more robust housing recovery. As chart 2 below illustrates, after dipping to 79.8 million accounts in the second quarter of 2011, the number of auto loan accounts has risen by 5.4% to 84.0 million accounts. Meanwhile, the average auto loan, calculated by dividing the total amount of auto loans outstanding by the total number of accounts, has risen by 11.9% since it reached its trough in the first quarter of 2010. Since the second quarter of 2011, when the number of auto loan accounts began to rise, the average auto loan has increased by 9.3%.


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