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In Absolute and Percentage Terms, Consumer Credit Jumps the Most Ever

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13 comments on In Absolute and Percentage Terms, Consumer Credit Jumps the Most Ever

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The Fed’s Consumer Credit Report for November shows lots of new records. 

New Records

  • The monthly credit increase of $39.99 billion was the biggest jump ever. 
  • Revolving credit surged by $19.84 billion, the most ever.
  • The month-over-month percentages rose by the most ever.
  • New outstanding total in nonrevolving credit.

Consumer Credit in Billions Seasonally Adjusted 

Despite the surge in in revolving credit to $1,037.41 billion, revolving credit is still below the pre-pandemic level of $1,097.54 billion. 

Non-revolving government credit is mostly student loans. That category hit a new record level of $1,438.03 last month. It just missed a new record in November and now sits at $1,437.27.

Consumer Credit Annualized Monthly Percent Change 

Revolving credit surged 23.39% in November, a new record. 

Total credit surged 10.97%, a new record. 

What Are Consumers Buying?

I suspect things they cannot afford for homes they cannot afford.

Under this theory, the unaffordable home comes first then the need to furnish it. 

That nicely explains the surge in both revolving and nonrevolving credit.

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BowserB46
BowserB46
2 years ago
It’s too early in the inflation cycle, but we’re likely to see new records every month once the psychology of inflation kicks in.  As someone who lived through the 70’s inflation as a working adult, I think this kind of debt growth is predictable.  It was almost routine to buy on credit anything that might cost more next year.  Houses especially.  Buy now, because next month the same house will be 1-2% more.  Don’t worry if you can’t afford the payments today, because your next raise will cover it.  I knew people who “traded up” houses every three years in the 70’s.  Some of them got caught “when the music stopped” of course.
We have two generations now who haven’t experienced inflation.  Just watch as they make the same mistakes our generation (early baby boomers) did–although in some cases, the mistakes paid off, as a house was one of the best investments when the stock market (DJIA) only increased a net of 3.5% in ten years.  Buy and sell a house, and you could gain 5% in one year, even after real estate commissions, loan closing costs, and moving expenses.
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Zardoz
Zardoz
2 years ago
People have become accustomed to a government handout-enhanced lifestyle.
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Tony Bennett
Tony Bennett
2 years ago

“Under this theory, the unaffordable home comes first then the need to furnish it. 

That nicely explains the surge in both revolving and nonrevolving credit.”

…
Sure, I buy this for part of it, but not all.  CNBC probably popping the champagne, but if you believe cpi understates (count me in this group) true inflation, then households are spending more just to keep status quo.  True demand won’t be revealed till later.  Won’t be shocked at all in coming months if inventory builds surprise to the upside.  If business orders fall off …
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caradoc-again
caradoc-again
2 years ago
When current demand depends on what these charts show you don’t have to be too clever to understand what happens when the circus leaves town. Prepare.
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whirlaway
whirlaway
2 years ago
I was looking to swap a credit card for another one recently, and found that the credit card market is insanely hot.   Sign-up bonuses, 3%, 4%, 5% cash/points/miles rewards, travel portals and credits, hotel credits, 5/24 rule, 2/3/4 rule, 8/65 rule and on and on.   The fact that we are some 60B off the previous peak of credit card debt seems to be enough for the banks to rush out with tons of offers.  And credit card addicts are going crazy.   It is scary, to say the least.
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dbannist
dbannist
2 years ago
Reply to  whirlaway
I sign up for one every 3 months or so.  
With 1000 in cash bonuses for signing up for a card you’d be stupid not to do it.
I easily earn an extra 4k a year just signing up for cards….not including the cash back earned.
Including that it’s more like 4500 a year.  That’s not pocket change and is completely free money.
If you want to sign up for one, I’d get 250 for referring you and you’d get 1200 for signing up.  It’s the Capital One Venture X card.  It seriously has a 1200 sign up bonus.  Best deal ever.
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whirlaway
whirlaway
2 years ago
Reply to  dbannist
I imagine some people start bogus LLCs or corporations so they could get the business cards too…   Make 4K-5K in a year like you said while paying the state $500 or something in taxes, perhaps?
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BowserB46
BowserB46
2 years ago
Reply to  whirlaway
You can tell when a lot of people are in trouble with credit card debt.  Radio and TV are flooded with “We can make your credit card debt go away for pennies on the dollar!”  As though the banks are at fault for people’s irresponsible spending of money they don’t have.
Hey, maybe there’s a worldwide company that can do that for America.  “America, get out of debt for pennies on the dollar!”  Only problem?  A lot of that government debt is to US!  Brokerages, mutual funds, pension funds with U.S. government debt.  Oops.
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billybobjr
billybobjr
2 years ago
With a soon to be 30 trillion dollar debt owed by the feds that will never be paid back and almost all of it accumulated in the last 20 years or so does any of this really matter . The government should set the example for the people to be responsible with their finances they are basically bankrupt. Why would we expect people to be responsible when it comes to their finances when the government has no intentions of making the hard choices  ?
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BowserB46
BowserB46
2 years ago
Reply to  billybobjr
Good point, billybob.  Inflation is a friend of careless debtors–like the U.S. for example.  Seven years of 10% inflation, and you pay off debt with half price money.
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Greggg
Greggg
2 years ago
Credit cards, the new stimulus replacement?   I have 2 kids that still have student loans.  One of them could pay it off pretty much any time he wants, but he doesn’t.    He has his degree in finance.  Maybe I’ll ask for a breakdown of the plan or something.   Should be something I am not familiar with.  Love the video.  Here’s one of my all time favorites.  link to youtube.com
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Maximus_Minimus
Maximus_Minimus
2 years ago
“Despite the surge in in revolving credit to $1,037.41 billion, revolving credit is still below the pre-pandemic level of $1,037.41 billion. “
A typo?
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Mish
Mish
2 years ago
Reply to  Maximus_Minimus
Corrected – Thanks
$1,097.54 billion. 
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