Total Consumer Credit

Since peaking at nearly $2.6 trillion in July 2008, consumer credit outstanding has fallen in 20 of the past 23 months by a total of 6.3 percent. Included in this category are revolving credit – primarily credit cards –  and nonrevolving credit such as auto, mobile home and student loans. Loans secured by real estate are excluded. The period of decline is the longest since the Federal Reserve began tracking this data in 1943, and it is the steepest drop by far since the end of World War II. The decline is due to banks that have tightened lending standards and households that are deleveraging, i.e. paying down debt and saving more. Rising default rates also are playing a role, a term called debt destruction. As households borrow less and save more, they have less cash available for spending, which has held back the pace of the recovery because personal consumption expenditures account for about 70 percent of GDP. The deleveraging process combined with weak job growth and the soft housing market are keeping retailers cautious and dampening leasing activity in shopping centers. Over the long haul, however, stronger household savings will expand the reservoir of capital available for investment, which should help reduce the trade deficit and provide more stability for global capital flows. Source: Federal Reserve