Friday, April 23, 2010

Consumer Lending Reaches Record High in March; Business Lending Increases for Second Week

Update: Thanks to Barry Rithhokz for pointing out that there was a one-time accounting change that led to the jump.

Consumer lending jumped by more than $83 billion in March to $901.6 billion, the highest level in history, according to data recently released by the Federal Reserve (see chart above).

Business lending increased the last week of March and the first week of April, the first two back-to-back weekly increases since December 2008, see chart below (data here).


At 4/23/2010 9:46 PM, Anonymous Anonymous said...

Woah. That's a scary statistic (this looks like consumers tapping "free money" to fill the gaps).

At 4/23/2010 9:59 PM, Blogger Bill said...

This too may portend higher inflation down the road just as did the credit boom of the 2000s.

At 4/23/2010 10:00 PM, Blogger PeakTrader said...

I wonder how much of the spike in consumer lending was from the $8,000 homebuying tax credit (we'll find out after April 30th, although there may be buying of related housing goods for some time).

Sales of New Homes Soar With Help of Tax Credit
April 23, 2010

Sales of new single-family houses in March were up nearly 27 percent at a seasonally adjusted annual rate of 411,000 units.

The monthly rise in sales of new homes was the biggest since April 1963, when it was 31.2 percent.

Some analysts expect a slowdown as the tax credit tapers off. They cited other issues, too, including some overbuilding and millions of home foreclosures.

“The market is really weak and if it were not for the tax credits we would not be seeing these good numbers,” said Patrick Newport, United States economist for IHS Global Insight.

In addition, the figures show it would take 14.4 months for builders to sell a new house, he said. “That says the market for builders is still awful. They have a hard time competing in a market where there are so many homes selling at distressed prices.”

At 4/23/2010 10:12 PM, Blogger PeakTrader said...

I think, if we had a $787 billion tax cut a year ago, it would've jolted GDP into a real V-recovery.

At 4/23/2010 10:24 PM, Anonymous morganovich said...

it will be interesting to see the consumer lending number in april. march 31 was the end of the fed mortgage purchase program.

At 4/24/2010 12:16 AM, Blogger KO said...

Sharp decrease in M2, sharp increase in consumer debt.

I thought we had turned into a nation of savers.

Following the links, the source data seems to be here:

"H.8; Page 2" has the figures and they have the last 4 weeks added on. Line 15 is Consumer Loans which includes credit cards and other loans.

Other Loans is: "11. Includes loans for purchasing automobiles and mobile homes, student loans, loans for medical expenses and vacations, and loans for other personal expenditures."

There's a doubling of credit cards in the last week of March, which can't be right. I wonder if that credit card law caused an accounting change.

At 4/24/2010 3:52 AM, Blogger KO said...

Ok, the business graph took a while to figure out.

The consumer graph uses monthly data based on all commercial banks - "Assets and Liabilities of Commercial Banks in the United States."

The business one uses weekly data on "H.8; Page 10" "Assets and Liabilities of Large Domestically Chartered Commercial Banks in the United States"

"Large" means the top 25 banks by size. The graph for "All" commercial banks shows a decrease in the business debt through March, but the weeks in April are slightly up.

The increase in commercial loans for the "Large Commercial Banks" could be two banks trading places at 25 and 26 or something like that. The large banks account for about half the total commercial loans.

So, the story is, business lending is down with maybe a turn in April and consumer lending seems to have some issue with the data.

Credit card balances could have gone from $326.1 billion to $662.5 billion in the week of Mar. 31, but I think that means nearly every GDP dollar that week went onto credit cards. The other consumer loans has a bit of a step as well. Could be some of the seasonality adjustment, but the consumer ones are too big not to be due to that credit card law or some other reporting change.

At 4/24/2010 7:19 AM, Anonymous Anonymous said...

It pays to read the fine print.

OA flagged the problem but not the answer. $365 billion of consumer loans were re-classified from off-balance sheet to on-balance sheet due to changes in accounting regs. There is now a substantial break in the weekly H.8 data set.

At 4/24/2010 11:12 AM, Anonymous gettingrational said...

Business lending increase is very,very good news.

Consumer lending increase is disappointing news.

At 4/24/2010 1:30 PM, Blogger KO said...

Thank anon.

So March comparable should be around $818 billion. There is a slight increase to around $830 in the early weeks of April.

It's weekly data that's converted to monthly for the graph. Only the last week of March was affected, while all of April will be.

The graph will shoot to around $1.2 trillion for April and then go a bit sideways. Whatever changes there are will be dwarfed by that pop.


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