Consumer Borrowing Increased in July 2011

According to the Federal Reserve’s latest G19 Statistical Release based on July 2011 data, this was the tenth consecutive month that consumer debt increased since April 2008.  From June 2011 to July 2011, credit borrowing increased $12 billion, which was double than projected.  This was due to non-revolving debt which increased by $15.4 billion which is an annual rate of 11.2%. Revolving debt decreased by $3.4 billion which is an annual rate of -5.2%.

Non-revolving

The Federal Reserve’s definition of non-revolving credit includes student, auto, boats, and personal and mobile home loans.  For this report, debt secured by real estate such as residential mortgages and home equity lines of credit are not tracked. The increase in non-revolving debt was mostly federal government debt from student loans.   There was a slight increase in car borrowing, which increased from an annual rate of 11.41 million autos to 12.2 million.

Revolving

Revolving debt is 98% comprised of credit cards. In July 2011, revolving credit had the largest decrease in six months. Consumer spending on retail sales in July was below the Commerce Department’s forecast.

Reasons for spending increase

Consumers are still cautious about spending.

Consumer confidence has fallen in recent months.

Consumers are more pessimistic about economic conditions and their own financial future.

Many consumers still have high debt.

Many college tuition are due in July.

According to Federal Reserve Chairman, Ben S. Bernanke, “only a portion of the economy’s weakness stemmed from temporary factors such as a surge in energy prices earlier this year. Persistent headwinds are also holding back the recovery, including high unemployment, tight credit and a flagging housing market. “

This is consistent with other reports that student loan debt is rising.  Until students graduate and become employed, their debt won’t decrease.   As more continue to go to college and need financing for education, this trend will continue. It will be interesting to see the numbers in August, since much has happened, both politically and economically.

John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Monitoring, Credit Report, Credit Score, Debt, Money & Identity

This post was written by John Ulzheimer