The Decline in Revolving Consumer Credit

By at 7 December, 2020, 4:45 pm

by Raymond J. Keating-

The Federal Reserve reported that consumer credit for October increased by 2.1 percent (at a seasonally adjusted annual rate). That was all about a 4.8 percent increase in nonrevolving credit, including motor vehicle loans.

As for revolving credit, i.e., mainly, credit cards, it declined by 6.7 percent in October. That October decline came after drops of 4.0 percent in the third quarter, 30.8 percent in the second quarter, and 7.6 percent in the first quarter.

Source: Federal Reserve Bank of St. Louis, FRED

None of this is surprising given the pandemic and resulting economic ills. Uncertainty and unemployment obviously have had a grim impact on consumer spending.

In order to get the consumer reinvigorated, however, first must come a recovery in entrepreneurship and private investment. That’s what is needed to drive economic, income and job growth, with the consumer then following suit.

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



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