Following a major miss in July consumer credit which declined by $3.3 billion (since revised to a -$2.5 billion decline), it was only natural that August would be the opposite, and see a rebound over consensus. Sure enough, the August total consumer credit number came in at $2.73 trillion, an increase of $18.1 billion from last month, on expectations of an increase by $7.25 billion. Why did the number rise? Same reason as always: a government-funded pump into non-revolving (i.e., Student and Government motor loan) credit which soared by $14 billion while revolving credit posted a modest $4.2 billion increase unable to even offset the July decline. But in headline scanning algo news, this was the highest jump in post-revision (recall last month the Fed completely redid its consumer credit series data which is now useless for any analysis going back before December 2010). Yet oddly even with this massive pump the stock market has refused to rebound and instead is acting in a very odd fashion and the now traditional green color of stock moves has taken on an odd reddish hue that is unfamiliar to the current generation of traders.
From a funding standpoint, it appears that Uncle Sam has had enough, and after taking a breather in July with a tiny $1 billion injection into Student Loan, injected a whopping $24 billion of the total $40 billion in new NSA credit in August: this is highlighted on the chart below showing total credit by source. Needless to say, the biggest source of consumer credit in the past 4 years has been the Federal Government.
Finally, those curious why the government will do everything in its power to pump any and every possible dollar into the economy under the guise of student subsidies, here it is again: at last check there were $914 billion in Federally-Funded student loans and rising at a rate of $20 billion per month.