Consumer Confidence Confirmed in Consumer Credit Numbers

By at 8 November, 2018, 9:55 pm

Small Business Insider

by Raymond J. Keating-

The latest consumer credit report from the Federal Reserve – combined with the role that personal consumption expenditures played in third quarter GDP growth – generally confirms that feelings of strong consumer confidence are being translated into actual consumer action. That’s not always the case.

The Fed noted that consumer credit, at an annualized, seasonally adjusted rate (excluding loans secured by real estate), grew by 5.3 percent in the third quarter. That included 2.1 percent growth in revolving credit (generally credit cards) and 6.4 percent in non-revolving credit (such as motor vehicle, education, boat and vacation loans).

It is worth pointing out, and keeping an eye on, the fact that growth in consumer credit did slow in September compared to the two previous months, with revolving credit actually declining. Of course, this data can be volatile from month to month.

Over the long run, as noted in the following two graphs (courtesy of the Federal Reserve Bank of St. Louis, FRED), while non-revolving credit bounced back relatively quickly after the credit mess of 2008, the decline in revolving credit and its recovery have been far more sluggish – to say the least.

In the end, as SBE Council has long noted, consumers are followers, and so long as business investment and job creation show strength, so will consumer confidence and spending.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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