After last month the Fed reported that in June revolving, i.e. credit card, credit unexpectedly soared by $7.7 billion, the second highest monthly increase since the financial crisis, many were popping the champagne, ready to celebrate the return of the consumer's "animal spirits" who were out and about, and most importantly, charging it. One month later, we find that the June revolving credit spike was even higher, rising by $9.2 billion following today's revision. However, as a result, the July consumer credit grew by just $2.8 billion to start the third quarter, the smallest amount since February, suggesting that the prior month's spike may have been a one-time fluke.
Perhaps more troubling is that while non-revolving credit rose just by only a revised $5 billion in June, this credit item, which is almost entirely in the form of student and car loans, once again spiked, rebounding to $14.9 billion in July.
In any case, as a result of these two series, in July total consumer credit rose by $17.7 billion in July, up from last month's upward revised $14.53 billion, and above the $16 billion expected, as US consumers continued to get increasingly more indebted.
However, while the credit spigot appears to be fully functional once again, it does not explain the disappointing car sales numbers in recent months, which prompted Ford earlier this week to warn that US car sales have now hit a "plateau." If so, one wonders just what these car loans, which total $1.1 trillion, are being spent on.
As for the student loans, which now amount to $1.4 trillion, the endgame there is clear, and was provided by this week's dramatic collapse of ITT Tech: sooner or later, all such loans will be forgiven at the expense of the US taxpayer.