The Federal Reserve’s latest G.19 Consumer Credit Report shows rising trends in consumer credit, excluding loans secured by real estate, through August 2019.
In August, consumer credit increased at a seasonally adjusted annual rate of 5.3 percent from the previous month, with revolving debt1 decreasing by 2.2% and nonrevolving debt2 increasing by 7.8%. Consumer credit totaled $4.1 trillion on a seasonally adjusted basis, with $1.1 trillion in revolving debt1 and $3.1 trillion in nonrevolving debt2. This is an increase of $18 billion from the previous month, with the decrease in revolving debt of about $2 billion partially offsetting the increase in revolving debt of about $20 billion.
This month’s percentage increase in nonrevolving debt is the largest increase that has occurred since November 2017, when it had increased by 7.9% from the previous month. On a non-seasonally adjusted basis, this month’s flow of $36 billion to the previous month’s outstanding level of nonrevolving debt marks the greatest increase since August 2016. As in that period, most of the increase this period also owed to the closed-ended credit extended by the federal government, which is also the largest component of nonrevolving debt. This manifests most prominently in the form of student loans, a long-established barrier to homeownership. In contrast, the federal government does not extend open-ended credit. The figure below shows the components of nonrevolving debt trending since the end of the Great Recession.
- Revolving credit plans are largely composed of credit card debt but also include home equity lines of credit (HELOCs). These may be unsecured or secured by collateral and allow a consumer to borrow up to a prearranged limit and repay the debt in one or more installments. The G.19 Consumer Credit report excludes HELOCS and home equity loans, as they are secured by real estate.
- Nonrevolving credit is closed-end credit extended to consumers that is repaid on a prearranged repayment schedule and may be secured or unsecured.
It appears that consumers are using their tax savings and their increase in wages and buying big ticket items on credit. Since our economy is consumer driven, this would not be a bad thing.