U.S. Consumer Credit: A 12 Month Review

I remain a bear of the U.S. markets, but the U.S. consumer credit numbers for November 2011 (just released in January 2012) were striking and definitely not bearish for the markets. If consumers are happy to take on debt, for whatever reason, it is very bullish sign. However, as with all things in economics, the devil is in the details. Below is a table of the consumer credit breakdown, from December 2010 to November 2011 (the latest available data) from the Federal Reserve Economic Data


Month TotalRevolving


TotalNon Revolving


US GovNon revolving


Non RevolvingLess


Non Revolving



Dec-10 2.20 4.10 0.70 3.4 6.30
Jan-11 -5.50 6.10 24.40 -18.30 0.60
Feb-11 -1.90 10.10 8.20 1.90 8.20
Mar-11 0.00 4.40 6.20 -1.80 4.40
Apr-11 -2.50 6.20 4.20 2.00 3.70
May-11 3.00 3.00 5.50 -2.50 6.00
6 month Total -4.70 33.90 49.20 -15.30 29.20
Jun-11 2.60 9.10 5.20 3.90 11.70
Jul-11 -2.70 14.10 15.60 -1.50 11.40
Aug-11 1.60 -8.90 6.10 -15.00 -10.50
Sep-11 0.4 7.10 14.30 -7.20 7.50
Oct-11 0.7 5.30 3.80 1.50 6.00
Nov-11 5.6 14.80 6.40 8.40 20.40
6 month Total 5.00 41.50 51.40 -9.90 46.50
12 month Total 0.30 75.40 100.60 -25.20 75.70


Let’s take a Look at the four subheadings:

Category 1 – Total revolving credit (credit cards, etc)

The figures for credit card debt have been rising very slowly during 2011, but the latest figure is the highest by some margin. However these figures may be distorted by the imposition of charges on debit card transactions introduced in October by several banks. These may be pushing consumers into using credit cards rather than debit cards. If consumers have seen that their statement for October has debit card fees on it, they may have changed to using credit cards in November. If you take out the November increase from the 6 month figure, it goes negative again and is comparable to the first 6 months of the year. It is clear that something has changed for November. This is either consumers switching from debit cards to credit cards or a change to higher spending habits using credit cards. It is unclear which, but both seem possible.

Category 2 – Total non revolving credit

Once again, the non revolving credit figures are slowly improving with the 6 month totals showing a steady increase. The figure for November is the highest for 12 months but it does not stand out as a change in trend as the revolving credit figure for November does.

Category 3 – Government non revolving credit (now included in total above)

This figure is generally regarded as a proxy for the increase in student loans from Sallie Mae. This is almost flat on a 6 month view. However Sallie Mae does securitize some of its loans and so there may be an increase in the totals of student loans for the period, not apparent from these figures. Once again, nothing unusual here.

Category 4 -Total non revolving credit less Government non revolving credit

This category will tell us what is happening to non revolving credit, once student loans are stripped out. This is the credit used for buying goods and therefore an indication of consumer credit demand. My assumption here is that families will send their children to university as a priority and so it is almost a forced increase in credit. Once this is stripped out, a better figure for discretionary spending will be revealed. This category is negative for both 6 month periods and is only slightly up for the latest 6 months. However, the November figure once again stands out as a change of the trend. It is substantially above any other month of the last 12. The common explanation for this is that, as the effect of the Japanese tsunami has now worn off, the latest models of cars are now available. The improved figure is a result of consumers taking advantage of the choice that is now available. If this is true the increase will be temporary in nature and will end, once the pent up demand has been filled. The more constructive view is that the availability of cars is irrelevant; consumers have just changed their habits and are spending more. Once again it is impossible to say which is correct. The next three months of this category, if constant at the same higher level, will provide an answer and may mark a change that is important.


The November consumer credit figures were a substantial change from previous months in categories 1 and 4 above. There may be reasons that they will return to more normal levels in the coming months. In particular, the introduction of fees for debit cards may permanently move spending onto credit cards and distort the figures, which may make them particularly difficult to analyze in the future. However for categories 2 and 3 above the figures are just part of the ongoing trend. This trend is very slightly upwards and can be reasonably ignored in deciding if November marks a distinct change.

Categories 1 and 4 will need watching for the next 2-3 months to provide the answer to the question – Is this a change of behavior? At present it is not clear what will happen and I will wait for further data before I change my opinion (which is that these figures are not a change in behavior). You can see the data and make up your own mind.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: Long RWM & RIMM

U.S. Consumer Credit: A 12 Month Review. (2012, January 16). By Jeremy Robson. Retrieved from http://seekingalpha.com/article/319772-u-s-consumer-credit-a-12-month-review.


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