Consumer Credit

Consumer credit -- excluding mortgages -- declined again May, and
it is down about 7% from the peak of nearly $2.6 tril. in 2008. This
no doubt reflects the severe decline and only partial recovery of
retail sales over the period, but It is also probably an outcome to be
expected given the extraordinary plummet in consumer confidence
as well. Confidence has recovered modestly over the past year, but
it is just coming up to the lows registered after prior economic
declines. Chart.

The chart does show an extended period of low confidence in the
early 1990s. Back then, the housing market was also weak, and there
was a surge in so-called white collar layoffs not seen before in the
post WW 2 era over the same interval. Noteworthy is that total
consumer credit was flat over most of the 1990 - 93 period before
recovering.

I am reluctant to say we have entered a "new normal" era of
consumer deleveraging or credit use austerity, as it seems that the
round of revolving credit paydown / default we have witnessed in
this cycle reflects the depth of the recession and the pounding
consumer confidence has taken -- weaker home prices, damaged
retirement savings, a depressed job market. I think it is too early
in the game to posit a new era of austerity and that we need to
first see how confidence responds to continued economic recovery.