The Consumer Credit Report released each month by the Board of Governors of the Federal Reserve System. It provides an estimate of the dollar amount of outstanding loans to individuals. Real estate based loans (mortgages, home equity lines of credit) are not included, although other non-revolving loans such as automobile loans are. The report provides data on the level of loans along with average interest rates paid. Data are collected through surveys of banks and other financial institutions.
According to the Federal Reserve, the amount of consumer credit outstanding in December was up 7.3 percent over the year to $3.1 trillion. Both revolving debt (credit card debt) and non-revolving credit rose by over 7 percent on the month. Interest rates in the 4th quarter of 2013 were down slightly from the 3rd quarter suggesting that lenders believe the potential for inflation is modest. Loans from banks and other depositary institutions account for most of the growth over the month, and bank loans represent the lion’s share of outstanding debt at $1.278 billion. There was also substantial growth in consumer loans from Federal government sources particularly for non-revolving loans such as student loans.
Consumer credit is considered a good indicator of the potential future spending level, particularly when interest rates are down or at least flat. The figures are; however, volatile and there is a lot of seasonality in the monthly figures. Higher levels of revolving consumer credit do suggest that spending should be up; however, this has not been reflected in retail sales. One reason may be due to the fact that significant growth has occurred in the student loan segment. Student loans accounted for 39.5 percent of outstanding consumer debt in the 4th quarter of 2013, up from 38.6 percent at the end of 2012. Higher student loans are both a good and a bad thing. On one hand they are reflective of the higher cost of education, while on the other hand they suggest that people are investing in human capital, which will bode well for growth in the future.
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