Consumer Credit Contracts For 9th Straight Month, Non-Revolving Credit Increases
The latest Federal Consumer Credit update was just released.
Consumer credit decreased at an annual rate of 3-1/4 percent in the third quarter of 2009. Revolving credit decreased at an annual rate
of 7-1/4 percent, and nonrevolving credit decreased at an annual rate of 1 percent. In October, consumer credit decreased at an annual
rate of 1-3/4 percent.
Total borrowings declined by 3.5 billion to a total of $2,482.9 billion, with revolving credit declining by $6.9 billion while non-revolving increased by $3.5 billion. As non-revolving credit is directly linked to auto purchases, the seasonal spike in this segment is not surprising as consumers rushed to get financing for all those CfC subsidized Toyotas (and to a lesser extent, domestic cars). Notable is that the LTV increased to a skyhigh 93%, while the average amount financed has hit a record of $32.3k, a jump of over 6% MoM. The expected total decline was $9.4 billion, with economists likely ignoring the consumer need to finance even much cheaper auto purchases.
Another perspective on the seasonality of consumer credit MoM changes since 1943 courtesy of CreditTrader, implying that there is a natural tendency for consumers to lever up into the holiday season.