The Federal Reserve's new data on consumer credit suggests that people are continuing to be careful about accumulating new debt.
Some newspapers are already saying that this is a good sign, but I'm not sold.
Sure there are some things to be positive about: The quality of debt is getting better: there is less revolving debt and more non-revolving debt. The former dropped by $8.5 billion, whereas the latter increased by almost $9.5 billion. Taken together, there is a bit more credit out there.
Part of what makes this less than outstanding is that the gains in debt issued by governments exceed the sum of new credit. The banks hardly budged - non-revolving debt supplied by commercial banks by just $100 million, and $6 billion in commercial bank revolving debt withered away. So the banks are actually doing less. Even an increase of
almost $2 billion by consumer finance companies won't make up for their lethargy. Besides, how much finance company debt is triggered by one-time tax credit incentives for home appliances and heating systems?
It is hard to believe how much shrinkage there has been in outstanding securitized debt. The Fed says that there is about $154 billion in outstanding securitizations of consumer debt. In 2008, the Fed said that there was more than $640 billion out there.