Consumer credit trend overall has significantly decreased from the sub-prime crisis. The rate of outstanding credit falling less in 2009 signaled a bottom to come. At the start of 2010 consumer credit bottomed and tight credit eased off. Through 2010 and into 2011 credit has started to come back into the markets.
A breakdown in the the total trend shows the huge drop in outstanding credit came from the unwinding of pools of securitized assets from mortgage related institutions along with small drop in financial companies. The only substantial growth in consumer credit can be seen from the Government and Commericial Banks. Interestingly though at the start of 2010 Commercial lending activity seems to have started to decline all the way into 2011, and government support continues to rise.
We can see the decline in the Commercial Bank is coming from revolving credit. Obama's regulation on consumer protection could be putting a dent on this. We see in the second chart that Commercial Banks benefited greatly from revolving credit. The commercial banks switched to a fee based model vs. a loaning model hence the huge jump in 2008 in consumer credit. Throughout this period loaning has contributed to little consumer credit growth at all.
Banks are getting kicked left and right on how they can make profits. Its only a matter of time before non-revolving credit starts to add more value for banks again. It has been 3 to 4 years since the start of sub-prime. I believe in another 1 - 2 years commercial bank portfolios should be clean enough to start healthy lending in in non-revolving credit which could spark much needed investment and perhaps be the catalyst to allow for corporates to unless their pent up cash.
Much of this slow growth has been in opinion, due to a lack of banks willingness to lend due to tighter regulation, fear, uncertainty in growth, cleaning up lending portfolios etc... Once this huge hump can be passed, we should see a stronger pick up to growth and the jobs market.
Percentage of Total Change 2006 - 2011
(Percentages)
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