Consumer credit expanded at a 10.2% annual rate in March. Of that, nonrevolving credit grew 11.3%. This “includes automobile loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations.” Revolving loans, mainly credit card debt, grew at 7.8%. For the Fed’s G19 report go here.
To make it easier to visualize, here is a graph that shows an historical perspective:
Bloomberg notes that it is the biggest gain since November, 2001. (Of course you recall what happened in September, 2011.) The data suggests that it was due to a jump in student and auto loans. Auto sales “soared” in Q1. Edmunds attributes that to pent-up demand, an aging “fleet”, warm weather, fleet sales, and growing consumer confidence. Consumer confidence they noted, closely follows the stock market. Auto sales heavily influences these data since nonrevolving (auto) loans are double revolving (credit card) debt.
In normal times one would say that credit growth is a sign of a healthy economy. In times where so-called “economic growth” is a figment of quantitative easing, it is not healthy. Americans are still heavily in debt:
It is easy to see from this chart: consumers kept piling on debt (blue line) up until the Crash in 2008 when fantasy ran into reality. For almost 30 years (1959 to 1989), the debt to income ratio was relatively healthy. From roughly 1990 forward money supply and credit began to expand as several boom-bust cycles caused a continuous build-up in debt, a result of the idea that monetary inflation could create wealth. By 2008 it was obvious that it didn’t.
So now we have economists saying that the present build up of consumer credit is a sign of healthy economic growth. How can that be? It is rather more evidence of economic weakness brought about by injections of monetary steroids.
Compare the consumer credit statistic to consumers’ declining savings rate (dropping below 4%) and it tells us that with static wage and earnings growth consumers are funding consumption with debt and savings. Not a healthy sign for an economy that needs savings, not spending. You can’t rebuild the economy and create prosperity on more debt. We first need savings; then comes production. We need a lot of other things to get the economy grow, but getting consumers deeper into debt isn’t one of them.