CONSUMER CREDIT IMPROVEMENT: STILL MOSTLY STUDENT LOANS
By Walter Kurtz, Sober Look
MarketWatch: – U.S. consumers increased their debt in April by a seasonally adjusted $6.5 billion, the smallest increase since last October, the Federal Reserve reported Thursday. This is the eighth-straight monthly gain in consumer borrowing. The increase in April was just more than half of the roughly $11 billion gain expected by Wall Street economists. The report also includes revisions to reflect improvement in methodology and a review of the source data, according to the Fed. Credit growth in March was revised to a gain of $12.4 billion, compared with the initial estimate of $21.3 billion.All of the increase in April came from nonrevolving debt such as auto loans, personal loans and student loans – with these three categories combined for a $10 billion jump. Credit-card debt fell by $3.4 billion in the month after a $3.7 billion increase in March
Once again reporters fail to point out what types of nonrevolving credit caused this increase. The chart below shows the major owners of non-revolving consumer debt in the US. Auto loans would be bank owned or securitized. Personal loans would be provided by banks or credit unions. When it comes to consumer credit, the federal government only owns student loans – and they own a great deal of them. In fact that’s where the $10bn increase is coming from (orange line below).
 |
| USD MM (source FRB) |
The Obama Administration is clearly trying to head off this issue in the press as concerns mount. Here are a couple of Twitter posts from the White House (both from today):
7 Comments
To say that the increase in debt at a slower rate is an improvement is spinning the facts a little is it not?
Come on CR, we expect a little more credibility from you than that.
Cmon JH, read the article!
Not written by Cullen.
Walter Kurtz is not spinning credit change as a positive or negative, just critiquing the reporting of such as inadequate.
Even the text provided by MarketWatch is just basic reporting.
Who is the spinner here?
OK, a bit of retraction here…the HEADLINE, presumably written by CR does refer to increasing credit as an improvement.
Not sure increasing credit is an improvement in this environment.
JH I apologize for my hastiness.
Are student loans a reflection of the dire straights many of our citizens are in?. First they run through all of their unemployment benefits, then their savings, then on to the next source of funds…credit. First, lines of consumer credit, then credit cards, then finally to student loans, which I assume are the easiest to obtain, since they cannot be wiped out in bankruptcy proceedings. The unemployed may be swelling student enrollment just so they can access the student loans to feed themselves! Here’s a great link to a 1930′s inflation propaganda flick http://www.youtube.com/watch?v=JUvm9UgJBtg
It almost seems as a progression of desperation.
First they run through their unemployment in an unsuccessful attempt to find employment on the same level as they lost.
Then they use their credit cards for survival.
And finally they attempt to get re-trained using student loans in hope of finding employment in an environment of ever decreasing living wage jobs.
I’ve heard countless college graduates explain they couldn’t get a job, so they were getting another degree so they would be qualified for more jobs. The worst of these was a cousin of mine…. she got fired from every job she had, so she decided to get her MBA thinking that would fix things… the problem was that she was being fired because she was a lazy s*** and the type of depressing wet noodle personality that no one wanted to be around.
Degrees mean nothing if you don’t have other attributes… and that includes work experience… so I’m for interning over school
Currently wrestling with the college question with my oldest, NOT letting him borrow to go to higher education. Find a job first, then consider the next phase.
I totally agree that degrees mean nothing unless you can develop other positive work environment attributes