April’s Consumer Credit Research Notes

by Jim Baird on June 7, 2010

The primary takeaway from today’s consumer credit number is that the contraction in credit continued through the first quarter of 2010, contrary to previous estimates that indicated that consumer borrowing had expanded early this year.

Consumers continue to focus on paying down credit card and other revolving credit even as bankers began to loosen credit standards in recent months.

Today’s release estimates that consumers have reduced their overall level of revolving credit by about $120 billion since the end of 2008, which is a meaningful adjustment.

While the redirection of income toward debt reduction is holding back consumption and inhibiting greater economic growth today, the renewed emphasis of the U.S. consumer on improving their personal balance sheets should better position them in the future.

Although the report indicates that credit probably grew at a fractional pace in April, the downward revisions to February and March more than offset the better than expected growth in April, driving aggregate credit outstanding down to levels last seen in the June 2007.

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