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The consumer is back! Well, yes and no, and misleadingly so.

Today the Fed released its monthly report on consumer spending. Beauty or lack thereof depends on how you analyze the data.
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Consumer Credit Monthly Change Billions of Dollars 2021-05

Today's Fed G.19 Report on Consumer Credit. Upon release of the report I saw claims of "biggest surge on record" and other reports that the "consumer borrowing is back". 

It took a while to create new charts to look at long-term trends, changes in dollars and changes in percentage terms. The above chart shows a huge monthly surge. 

Consumer Credit Annualized Monthly Percent Change

Consumer Credit Annualized Monthly Percent Change 2021-05

Total consumer credit is up 10% annualized, revolving a whopping 11.4%, and nonrevolving 9.5%.

That's the way the Fed, BLS, etc., report data. Beneath the surface, the actual percentage increases were 0.83%, 0.95%, and 0.80% respectively. 

Instead of looking at distorted monthly percentage changes let's look at trends.

Consumer Credit in Billions of Dollars

Consumer Credit in Billions of Dollars 2021-05

That chart provides a far better understanding of the data than year-over year and monthly percentage increases. But let's hone in on that a bit further.

Consumer Credit in Billions of Dollars Detail

Consumer Credit in Billions of Dollars Detail 2021-05

Dare I suggest that revolving credit is not back and nonrevolving credit never went away? 

Even nonrevolving credit is misleading. Most of it consists of car loans and student debt.

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Many covid forbearance plans are in play and they have an impact on totals.

"Borrowing Is Back"

The WSJ reports Borrowing Is Back as Sign-Ups for Auto Loans, Credit Cards Hit Records.

Consumer demand for auto loans and leases, general-purpose credit cards and personal loans was up 39% in April compared with the same period last year, according to credit-reporting firm Equifax Inc.

 Equifax said lenders extended a record number of auto loans and leases in March, the latest month for which data are available.

They also bumped up credit-card originations, issuing more general-purpose credit cards than any other March on record. Equifax’s data goes back to 2010.

Separately, lenders mailed 127 million personal-loan solicitations to people’s homes in May, up from 60 million a year prior, according to Mintel Comperemedia, which tracks the offers.


  • Comparisons to a year ago in the midst of a pandemic are arguably silly. 
  • March isn't May. 
  • Credit card signups are not exactly the same thing as spending.
  • Mailing out home loan soliticizations by lenders is not the same as demand from customers. 

Some lenders are also extending more credit to people with low credit scores. Some 1.4 million general-purpose credit cards were given to subprime borrowers in March, up 28% from last year and 25% from 2019.

Roughly 602,000 subprime auto loans and leases were originated in March, up 31% from a year before. Balances on those auto loans and leases totaled $11.7 billion, the highest on record.

Those last two paragraph are what happens at every market peak. Banks halted credit applications and exited the mortgage loan business in 2009 and 2010 just as the housing market bottomed. 

Home Price Growth Hits a New 30-Year Record, What? No Inflation?

Note that Home Price Growth Hits a New 30-Year Record, What? No Inflation?

Now, after absurd price runups, creditors suddenly believe in taking on home equity loan risk and subprime auto loan risk.

What's Happening?

Based on the WSJ/Equifax picture and further analysis of the actual data, the increase in consumer spending reflects creditors' willingness to expand into subprime debt even as actual revolving debt is anemic despite record monthly surges.

This willingness to take on risk is right after huge increases in home and car prices (that will presumably keep rising to justify the increased risk).

I believe we saw this behavior at least once before. So, good luck with that.