PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Latest Consumer Credit Data Points to Improved Consumer Confidence

By at 9 July, 2021, 2:08 pm

by Raymond J. Keating –

The latest consumer credit report from the Federal Reserve may be pointing to a move up in confidence among consumers in May.

Consumer sentiment surveys are fine, as far as they go. But actions often can diverge from what’s expressed in surveys. Words, of course, have to be backed up by action.

Consumer credit (excluding loans secured by real estate) jumped by 10 percent (at a seasonally adjusted annual rate) in May. That included an increase of:

● 9.5 percent in nonrevolving credit (motor vehicle loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacation)

● 11.4 percent in revolving credit (mainly, credit cards)

Once the pandemic hit and millions of jobs were lost, consumer credit took a big hit. Consider the trend in revolving consumer credit in the following chart. It has not recovered at all.

Source: Federal Reserve Banks of St. Louis, FRED

The strong growth in consumer credit in May could point to a growth in confidence among consumers, and that would include in their own financial situations, in job opportunities, and in the overall economy. Let’s hope that May starts a trend.

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

 

News and Media Releases