The U.S. consumer debt total rose for yet another month in January of this year, the Federal Reserve told us in its latest consumer credit data release on Friday. This was also the 29th consecutive monthly increase. Following a downwardly revised $15.9 billion increase in December, the January total rose by $13.7 billion — less than expected.
As has become the norm in the post-Lehman years, January’s aggregate consumer debt growth was exclusively the result of yet another big rise of its non-revolving component and, especially, of the auto and student loan totals. The growth of the former total has been fueled by the ongoing economic recovery. The latter, however, has relentlessly kept increasing through crisis, recession and recovery alike.
The unrelenting rise of the federal student loan total had slowed down substantially at the beginning of 2013, which was welcome news, considering the huge expansion it had undergone over the past decade, and especially in the past five years, as you can see in the relevant chart further down. In turn, that growth, paired with a stubbornly high unemployment rate, has caused the student loan charge-off and delinquency rates to spike, a process which is not only ongoing, but is likely to intensify as the year progresses, even as the economy continues to recover.
In a reversal of December’s developments, when the credit card debt total spiked by the largest amount in seven months, January total fell, albeit modestly. Furthermore, December’s spike was downwardly revised by a substantial amount. By the way, that has been one of the most characteristic stories of the post-Lehman period: every single time we’ve had an unusually large monthly increase in the revolving total, it has been immediately reversed in the following month or two. And this is why, even with the only partially reversed December spike, that total is negligibly higher than the peak reached at the end of 2008.
Last month I wondered whether it was possible that the post-crisis era of subdued credit card debt accumulation was finally over and that the December increase in revolving credit indicated that Americans had rediscovered their penchant for a more liberal credit card use. After all, I noted, the economic recovery had been gaining ground and the unemployment rate just keeps falling. Not to mention that Americans now have much healthier credit card accounts than they’ve had in decades. And the trend of record-low and falling credit card delinquency and charge-off rates and record-high and rising monthly repayment rate (MPR) has continued in the first two months of this year, rendering the absolute debt level mostly irrelevant.
Well, despite all that, last month I admitted to having no idea whether we had turned a corner on credit card spending and now January’s data indicate that the December splurge may have been just another blip. But let’s take a closer look at the latest Fed data...