Is Credit Card Addiction Back?

1774 WordsAug 15, 20168 Pages
US Consumers: Is Credit Card Addiction Back? The onset of summer tends to bring a lull in excitement levels in financial markets. The media is consequently forced to exaggerate the importance of economic releases over this seemingly mundane period, and this year has proven to be no exception. The Financial Times recently reported that US consumer credit had surged by $18bn in the three months to June, thereby provoking fears that banks were being reckless and consumers were taking on too much debt in a slow economy. These fears constitute a major departure from the worries that prevailed during the financial crisis, when many commentators were forecasting years of household deleveraging. Balance sheet adjustment in the sector would, therefore, have acted as a drag on the economy. This prediction helped to rationalise the case for the federal government’s stimulus in 2009. The subsequent outcome did not, however, fulfil these dire expectations. Although outstanding consumer credit declined during the Great Recession, growth subsequently resumed as early as November 2010. Since the inflexion point, the outstanding amount has risen +44%, at an annual rate of increase of +6.7%. This increase compares very favourably to just +3.2% and +4.6% for nominal GDP and personal disposable income, respectively. Every economic time series contains nuances, and consumer credit is, therefore, no exception. There are two components: 1) revolving, and 2) non-revolving. The former is dominated

More about Is Credit Card Addiction Back?

Open Document