Kevin Spires, CFA, FRM
The Federal Reserve's montly report on Consumer Credit was released yesterday afternoon and Consumer Credit increased by 4.4 Billion in March. There are two big stories buried in the report - the massive increase in the Federal Government's exposure to Student Loans and the coming deluge of Consumer Credit that is about to hit the economy.
The Federal Reserve's montly report on Consumer Credit was released yesterday afternoon and Consumer Credit increased by 4.4 Billion in March. There are two big stories buried in the report - the massive increase in the Federal Government's exposure to Student Loans and the coming deluge of Consumer Credit that is about to hit the economy.
The Federal Government's exposure to Student Loans has grown by almost 30% in the past 12 months. Total Federal Government exposure to Student Loans has reached 460 Billion from the 120 Billion at the start of President Obama's term in March of 2009.
The massive increase in Student Loan debt has masked the deleveraging undertaken by consumers actually able to make payments on their current debt as the outstanding amount of non-student loans dropped by over 17% during the same time period that the Fed's were pumping out Student Loans and inflating a Higher Education Bubble.
The massive increase in Student Loan debt has masked the deleveraging undertaken by consumers actually able to make payments on their current debt as the outstanding amount of non-student loans dropped by over 17% during the same time period that the Fed's were pumping out Student Loans and inflating a Higher Education Bubble.
The other big story is that non-Student borrowers have ended their deleveraging with non-Student Consumer Loans edging up year over year for the first time in years in Q1 2012. This trend will accelrate over the next 7-8 quarters.
Taking a look at the Federal Reserve's Senior Loan officer survey, An average of Bank's willingness to make Consumer Loans and Demand from Consumers for Consumer Loans is at a 15 year high. Historically, the readings from this survey have led Consumer Credit growth by 7-8 quarters. The implications are that Consumer Loans will continue to accelerate throughout 2012 and 2013 and will likely approach annual growth rates of 10% or more over the next year.
Taking a look at the Federal Reserve's Senior Loan officer survey, An average of Bank's willingness to make Consumer Loans and Demand from Consumers for Consumer Loans is at a 15 year high. Historically, the readings from this survey have led Consumer Credit growth by 7-8 quarters. The implications are that Consumer Loans will continue to accelerate throughout 2012 and 2013 and will likely approach annual growth rates of 10% or more over the next year.
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