Consumer Credit Declines at Shrinking Rate - Update
Total consumer credit declined by an annual rate of 0.75% in June 2010 and 3.25% in Q2 2010, according to the Federal Reserve. This monthly decline followed revised annual decreases of 2.6% in May 2010 and 6.45 in April 2010.
Non-revolving Credit Grows in June
Non-revolving consumer credit, which grew at a revised annual rate of 1.4% in May 2010 and fell 3.5% in April 2010, increased 2.4% in June 2010. During Q2 2010, non-revolving credit grew 0.1%.
Meanwhile, revolving consumer credit, which sharply fell at an annual rate of 10.2% in May 2010 and 11.8% in April 2010, dropped a smaller but still significant 6.5% in June 2010. During Q2 2010, revolving credit shrank 9.4%.
On a monetary basis, Federal Reserve estimates indicate that during the month of June 2010, total consumer credit decreased annually from $2.5 trillion to $2.42 trillion. Revolving credit, which mostly consists of credit card debt, fell from $912.5 billion to $826.4 billion. Non-revolving credit, which consists of loans and financing, stayed flat at approximately $1.59 trillion after rounding estimates.
Borrowing Losses Continue Growing
As opposed to consumer credit, which has fluctuated in somewhat of a seesaw pattern in the past year (especially the non-revolving portion), consumer borrowing has been in a general pattern of decrease since early 2008, according to Federal Reserve estimates. This pattern continued in May 2010, as consumer borrowing fell at an annual rate of 11.4%, from $762.4 billion to $673.7 billion. On a percentage basis, May’s 11.4% drop is on par with April’s 11.2% and March’s 10.3% declines, but much steeper than February’s 6. 7% or January’s 1.5% drops.
Chase Adjustment Slightly Raises Natl APR
The national average credit card annual percentage rate (APR) on July 28, 2010 was 14.44%, up slightly from 14.43% on June 30, 2010, but up a bit more from 13.17% on January 27, 2010. According to CreditCards.com, Chase adjusted its Slate card offer, with the product now charging APRs between 13.24 and 22.24%, compared with an earlier range between 11.24 and 22.24%. Since the national average is calculated using the low end of any APR ranges, that change caused rates overall to move higher.
In an effort to protect themselves from potential losses, banks have raised interest rates over recent months. Recent earnings reports from major card issuers, however, show that delinquencies, or unpaid bills, declined in the second quarter, according to data from the American Bankers Association.
Consumers Keep Saving
Personal saving among US consumers significantly outpaced increases in income for the third straight month in June 2010, while spending slightly declined, according to the monthly Personal Income and Outlays report from the Bureau of Economic Analysis (BEA).
In June 2010, consumers saved $725.9 billion, 1.7% more than a revised $713.9 billion saved in May 2010. Personal saving as a percentage of disposable personal income was 6.4% in June, compared with 6.3% in May.
Meanwhile, in June 2010, US consumers’ personal income increased $3 billion, or less than 0.1%, and disposable personal income (DPI),which is personal income less current personal taxes increased $5.1 billion, also equaling less than 0.1% growth.
U.S. consumers’ personal consumption expenditures (PCE), which essentially reflect consumer spending, declined $2.9 billion, or less than 0.1%, in June 2010. In May 2010, PCE increased $24.4 billion, or 0.1%. PCE has fluctuated more than personal income and DPI in recent months, dropping 0.1% in April but rising 0.5% in March.