Consumer Credit Unexpectedly Fell In August By Most In Over A Year

The consumer credit number just released and was dreadfully bad. Little revision to last month's number, it printed -$9.5bn against an expectation of +$8bn and prior over $12bn.  This is the biggest drop MoM since April 2010. More surprising is that we just saw the first drop in non-revolving credit in a year: since this is credit that goes out for car purchases and school loans, is either of these two bubbles (student loans and GM subprime loans) about to pop?

This is the biggest swing in the MoM contraction (or momentum deceleration) since May 1998! This shift in momentum, akin to the 'credit impulse' that has started to gather some following, has proved very useful in forewarning credit compression (as opposed to simply MoM changes) and is most recently discussed here by economist Steve Keen.

This is a six standard-deviation deceleration (based on the last 60 years of history).

The full breakdown between revolving and non-revolving can be seen below. The momentum swing is the biggest since 1998.

And courtesy of John Lohman, here is what credit looks like with and without Government loans.


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