The Federal Reserve Board said that U.S. consumer credit outstanding rose 5.4 percent in August, led by strong growth in nonrevolving debt. Total consumer debt outstanding was $3.037 trillion, with $848.9 billion in revolving credit and $2.188 trillion in nonrevolving credit.
The bulk of the increases of late have stemmed from nonrevolving credit, primarily from auto and student loans. Nonrevolving loans have risen 5.3 percent year-to-date and 8.2 percent over the past 12 months. These loans have helped to finance greater motor vehicle sales – one of the larger drivers of economic growth of late. But, the greatest growth has been in student lending, which is administered now by the federal government.
Student lending, which is administered by the federal government, has experienced tremendous growth, accounting for much of that growth, up 13.7 percent year-to-date and 20.4 percent year-over-year. If you were to exclude student loans, nonrevolving credit would have risen just 1.7 percent and 3.3 percent over the same time periods, respectively.
In contrast to nonrevolving credit increases, the level of revolving loans has barely budged for much of the past year or so. Over the past 12 months, revolving credit – which includes credit cards and other lines of credit – has risen by only 0.25 percent. Since August 2011, revolving loans have grown a paltry 1.3 percent.
This suggests that consumers have been more hesitant to use their credit cards when making purchases. Depending on your perspective, that might be either a good or bad thing. On the one hand, it means that Americans continue to deleverage, taking on less revolving debt. Yet, the jump in student lending has already stirred policy conversations, and the hesitance to take on additional borrowing for consumer purchases might be tied to continued anxieties about the larger economy. The latest data, for instance, indicate only modest gains in personal spending, with confidence in the economy dipping on fiscal budget worries.
Chad Moutray is the chief economist, National Association of Manufacturers.