PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

More Questions as Revolving Consumer Credit Jumped in November

By at 10 January, 2023, 12:59 pm

by Raymond J. Keating –

Consumer credit outstanding increased in November at a seasonally adjusted, annual rate of 7.1 percent, according to the latest report from the Federal Reserve.

And while nonrevolving credit increased by 3.9 percent, (that is, “motor vehicle loans and all other loans not included in revolving credit, such as loans for mobile homes, education, boats, trailers, or vacations”), revolving credit (mainly, credit cards) jumped by 16.9 percent.

That 16.9 percent increase was up from a 10.3 percent increase in October and 8.2 percent in September.

As noted in the following chart, the percent increases in revolving credit after the major drop due to the onset of the pandemic, and particularly since June of 2021, have been notable. That is, this has been running hotter than the general trend previously in the twenty-first century.

Source: Federal Reserve Bank of St. Louis, FRED

The question, as SBE Council has asked before, is:

How much of this increase in credit outstanding reflects a healthy recovery in consumer confidence post-pandemic, and how much of it is about people trying to stay afloat during a tough economy? The labor market would point to a degree of confidence, while GDP data would say the opposite. And what if we return to a recession as many expect in 2023? That is, will the recent increases in consumer credit create additional economic burdens?

More questions and concerns as we work to figure out where the economy is headed in 2023 and beyond.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.

 

 

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