Comments on: Why is everyone saying consumer credit is falling? It’s not.

By: Sorgenkinder • Börsennotizbuch

Sorgenkinder • Börsennotizbuch — Fri, 09 Oct 2009 07:34:12 +0000

[...] Auch ein Sorgenkind: Die Schulden der US-Konsumenten fallen nicht. Wahrscheinlich steigen sie sogar (egghat, creditwritedowns.com). [...]

By: Edward Harrison

Edward Harrison — Fri, 09 Oct 2009 00:08:00 +0000

As I said at Naked Capitalism:

Jake, you can look at the y-o-y data for SA or NSA data and they say the same thing. We are down.

When I reported the data I said:

The Federal Reserve has just released the most recent data on consumer credit. The data show outstanding consumer credit falling to $2.47 trillion in August from a December 2008 peak of $2.59 trillion – on a non-seasonally adjusted (NSA) basis. That is down 4.4% from the year ago period, continuing the acceleration of the year-on-year change that has been in place for 15 straight months. The seasonally-adjusted data tells an even worse story.

http://www.creditwritedowns.com/2009/10/consumer-credit-falls-4-4-from-year-ago-levels.html

You would find the same for the SA data.

But looking at SA month-to-month data in isolation and saying the sky is falling completely ignores the fact that consumer credit just ticked up for the first time since December. One could explain this via cash for clunkers, but to overlook it doesn’t make sense to me.

By: kfizzle

kfizzle — Thu, 08 Oct 2009 22:00:00 +0000

Well said.

By: Jake

Jake — Thu, 08 Oct 2009 21:09:00 +0000

Why disclude a seasonal adjustment? I am not positive as to why it would naturally jump in August, but back to school shopping seems like one obvious answer. I guess my question would be, would you want to ignore seasonal adjustments for toy sales in December too?

If you want to ignore those trends, then take the unadjusted data and look at year over year figures. August ’09 was down 4.4% compared to down 4.1% in July ’09 vs. July ’08. In other words… consumer credit is falling.

By: kfizzle

kfizzle — Thu, 08 Oct 2009 19:54:00 +0000

Absolutely. I’m glad/appreciate that you always point out the unadjusted
numbers for everything, I don’t know why that isn’t more common.

By: Edward Harrison

Edward Harrison — Thu, 08 Oct 2009 18:19:00 +0000

A lot of it is probably – especially when you see how auto sales collapsed post C4C. So, as I said, the right analysis is not “credit is decreasing” but “credit may have artificially increased due to one-off items. Let’s wait for more dat to find out.”

By: kfizzle

kfizzle — Thu, 08 Oct 2009 18:16:00 +0000

Ed, with that increase seemingly coming solely from non-revolving, how much of that increase do you think is attributable to auto-loans connected with C4C?