Consumer Credit Recovery?

By at 8 September, 2021, 9:54 am

by Raymond J. Keating –

Consumer credit continued to recover in July, according to the latest report on consumer credit outstanding from the Federal Reserve.

Rather than a survey of attitudes, reports on actual numbers, like consumer credit, provide a tangible insight on the state of the consumer.

Revolving credit (namely, credit cards) provide some insight on the confidence of consumers, in that consumers need to be confident about their jobs and future employment, for example, to feel comfortable with increasing the use of credit cards.

As noted in the following chart, after a significant decline with the onset of the COVID-19 pandemic, revolving credit took a big dive starting in March 2020, with the decline actually lasting through at least January. And it wasn’t until May of this year when consumer credit really began to expand. It has done so for three months now, though growth slowed in July.

Source: Federal Reserve Bank of St. Louis, FRED

At the same time, revolving credit outstanding in July remained well below where it was pre-pandemic. That’s not surprising given the number of people still out of work, and uncertainty about a host of issues, including the Delta variant and how President Biden’s plans for higher taxes and more regulation will affect the recovery.

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



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