Consumer credit rose far more than expected in the US during a month defined by the worst banking sector turmoil since Lehman.
That’s according to Fed data released late Friday. Consumer credit rose $26.5 billion in March, easily more than the $17 billion consensus expected. The 6.6% annual pace was the briskest of 2023.
Revolving credit rose $17.6 billion on its own, among the largest monthly increases in history.
It was the 23rd consecutive monthly increase or, put differently, revolving credit balances have risen every month since inflation took off in earnest. The data isn’t adjusted for prices.
The Fed’s efforts to squelch inflation are bedeviled by a resilient (stubborn, even) US consumer. To recycle familiar language, any disinflation case which assumes a slowdown in spending (and thereby less pricing power for corporate America) is a bet against a nation of incorrigible spendthrifts. Which is to say: Not a safe bet.
The YoY change for revolving credit was 14.13%, the slowest in 11 months, but still among the most rapid 12-month increases since the mid-90s. It’s illustrated by the dark shaded area in the figure below.
This is circular. Americans have likely leaned on credit cards to make ends meet amid an inflation impulse stoked by resilient consumption. The tragically ironic implication is that Americans need to go broke so they can stop going broke. Put differently: Corporates won’t stop raising prices until consumers are tapped out.
There’s a wild card now, though. In the wake of multiple bank failures, it’s possible that some consumers will find it harder to obtain credit going forward.
Note what the blue and red lines in the figure above appear to presage for revolving credit growth. And also note that both of those lines are likely to fall further when the Fed’s loan officer survey is updated.
why is it always, ‘leaned on credit cards to make ends meet”? And rarely, if ever, something like, consumers are confident about their ability to pay back loans or carry more debt and loaded up on credit ? From the second chart it looks like yoy credit balances DEcreased at the start of the recession in 2000 and in late 2007. Increases in balances seem to be in the good years before the recession.
We really do not know if people ‘want’ or ‘need’ to increase their credit card balances. March ’22 to March ’23 saw a 14% increase in balances outstanding. March 23 inflation was just under 8%.
Its very odd today to have such low unemployment and low Consumer Confidence. Constant harping about always out there recession otw, and the doomer vision put out by the gqp may be factors.
There are, generally speaking, two kinds of people who buy things on credit cards: 1) people who have plenty of money and use their cards to maintain sterling credit scores by using them, keeping them open and paying them off assiduously, and 2) people who don’t have much money. I mean, nobody should be “confident” in their ability to “carry” debt at 21% over a long period of time. That’s a financial death sentence. You either i) pay your cards off every month and cash in any rewards to partially neutralize any interest you were charged, 2) carry a balance at a huge interest rate because you can’t afford to pay your cards off or 3) don’t understand how interest works. I’m not sure there’s much else to it.
the ones paying them off each month, still carry a balance for some 25days. so both sets of people are in that figure.
Balances decrease in recessions, mostly, I think, due to write offs. The other part may be group 1) simply spending less, lowering their average daily balance.
Either way, just like job growth…its still going up, and then at some point it wont. but all this doomer anticipation is tiresome. There is a scenario where inflation cools a bit more, and employment stays OK and a real recession remains 6 months out for another couple quaters. Getting the debt ceiling done sooner than later would help that a lot.