94% Of March Consumer Credit Was For Student And Car Loans

Another month, another confirmation that when it comes to the US consumer, it is all about student debt (and to a lesser extent, car loans). Moments ago the Fed reported that consumer credit number for March: at $17.5 billion, it not only blew out the expectation of a $15.5 billion increase (although when one adds last month's $3.5 billion downward revision to $13.0 billion the two month total actually missed), but was the highest monthly increase since February 2013. That's the good news.

 

The bad news was once again in the composition: of this $17.5 billion $16.4 billion was non-revolving debt, or about 94% of total. The "good", or revolving, credit card debt? Only $1.1 billion.

Further, recall that traditionally when measuring a consumer's confidence in the economy, and their ability to grow their income, the best proxy is a simple one - their credit card. Unfortunately, in the New Normal that is not the case, and as the chart below shows, revolving credit has barely budged from its post-Lehman lows and is still about 20% away from its previous all time high.

 

As for student debt? We'll just leave that one to the Fed to show:

 

 

So where does the consumer credit growth come from? Simple: mostly student and to a lesser extent car loans, aka non-revolving debt. The same student loans which Janet Yellen earlier today lamented are the main reason for the slowdown in household formation, and by implication, the reason why the housing recovery is failing to stick for the fifth year in a row, and despite $2.7 trillion in liquidity injections by the Fed.

 

Oh well, maybe next month things will be different and all that student debt which is crushing the willingness of young Americans to go out and spend on bulk purchases will be restored.

Finally, and perhaps most important, for all the talk about a surge in consumer bank loans, it bears highlighting that of all the consumer debt so far created in 2014, the Federal Government is by far the primary source at $36.8 billion. As for depository institutions, aka banks: negative $28.2 billion.

Some lending spree all right.