Monday, March 20, 2023

US consumer credit parlous

 The chart shows the month-on-month change in outstanding consumer credit, extreme-adjusted to remove spikes (and there are lots of them because it is a month-on-month change) and smoothed.  Consumer credit tends to fall sharply during recessions, both because banks tighten credit standards, and because consumers become reluctant to borrow.   The cascading financial crisis will cause further declines in both supply and demand for consumer credit, because banks will be reluctant/unable to lend, and consumers will be wary of taking on new borrowing commitments.  And of course, interest rates have risen a lot.


Shading shows recessions


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