Consumer Credit Continued its Descent in August

Americans continued paying off their debt in August, as consumer credit declined for the seventh month straight. It fell by an annualized rate of 1.7%, according to the Federal Reserve. The decline was led by revolving credit, which mostly consists of credit cards. This component fell at a rate of 7.2%. Meanwhile, nonrevolving credit actually grew at a rate of 1.2%, which shows consumers taking on more loans for products like education and cars (the Fed's measure does not take into account real estate-related debt).

Here's the chart:

consumer credit 2010-08.png

Qualitatively, it's pretty clear how the top (total) and bottom (revolving) lines have declined, while the middle (nonrevolving) has remained relatively constant.

Quantitatively, total consumer credit has fell by $3.3 billion in August. It's down $167.6 billion, or 6.5%, since it peaked in July 2008. That's almost entirely due to revolving credit. It was down $5.0 billion in August, and $151.4 billion since it peaked in August 2008. That's an incredible decline of 15.5% in just two years. At this point, there's really no end in sight for the revolving credit deleveraging. It has now declined for 24 months straight.

When it comes to holders of credit, the trends we've been seeing mostly continued in August. The balances held by commercial banks, finance companies, and securitized assets all declined during the month. Credit assets held by savings institutions, credit unions, and nonfinancial businesses increased slightly. But the real growth was in debt held by the federal government, which mostly consists of additional student loans. It increased its debt holdings by $26.3 billion or 10.4% in August. Since 2006, the government has increased its credit holdings by 176%.