Consumer Credit

  • Today the Federal Reserve released monthly data on Consumer Credit

    from February 2009. In February, consumer credit decreased at a

    seasonally adjusted annual rate of 3.5 percent.

  • Revolving credit, such as credit cards that do not have a set

    number of payments, decreased 9.75 percent. Non-revolving credit, such

    as secured and unsecured credit for automobiles, mobile homes,

    trailers, durable goods, vacations, and other purposes, decreased 0.25


  • Previous figures on consumer credit for December and January were

    revised upward to show either a smaller decline or greater expansion.

    This is a small piece of good news.

What does today's data mean for REALTORS® and consumers?

  • Consumer credit outstanding in February 2009 is 2.56 trillion down

    from 2.58 trillion in July 2008. While this one percent decline may not

    sound significant, when you consider that the trend from 2003 to 2007

    was for growth in consumer credit near 5 percent annually, a one

    percent decline over about half a year is more of a concern. Growth in

    consumer credit growth over a longer historical period is even higher

    than the 5 percent seen in the recent past.

  • As consumer credit is squeezed, so are consumer purchases. Growth

    in Personal Consumption Expenditures, a contributor to GDP, tends to

    follow a similar pattern to consumer credit and declined at an annual

    rate of about one percent in the second half of 2008.

  • The consumer credit release does not provide information credit to

    the housing market via mortgages, home equity loans, or home equity

    lines of credit. It does, however, give us a picture of other credit

    available to consumers and therefore an idea of what pattern consumer

    spending may follow. The forecast is downgraded a notch as a result.

Daily Forecast Update

  • NAR's monthly official forecast as of April 1
  • GDP Q1: -5.0%
  • GDP Q2: - 1.8%
  • Unemployment rate by the end of 2009: 10.0%
  • Average 30-year fixed mortgage rate by the end of 2009: 5.2%