Consumer credit decreased at an annual rate of 10-1/2 percent in July 2009. Revolving credit decreased at an annual rate of 8 percent, and
nonrevolving credit decreased at an annual rate of 11-3/4 percent.
Here is a chart of the change:
Click for a larger image (obviously).
Credit has contracted since the 4th quarter of 2008. However, it's not completely the fault of banks who aren't making loans. Here is the statement regarding credit from the latest Federal Reserve survey of senior lenders:
For the second consecutive survey, domestic banks reported little change in their willingness to make consumer installment loans. The net fraction of domestic banks that reported tightening credit card lending standards fell significantly from nearly 60 percent to around 35 percent. Similarly, the net fraction of domestic banks that reported tighter standards on consumer loans other than credit cards declined to 35 percent, from 45 percent in April. For both credit card and other consumer loans, domestic banks continued to report tightening of loan terms and conditions, although the net fractions of banks that tightened were not as high as in April. The net fraction of domestic banks reporting weaker demand for all types of consumer loans rose a few percentage points, to about 20 percent.
And here is a chart of lending standards from the same survey:
While banks are tightening standards, the percentage of banks who are tightening standards has been dropping since late 2008. In addition, notice that the rate of loan tightening is about the same level as 1996 when the economy was expanding. In other words, current levels of loan standards regarding consumer loans is not necessarily a drag on economic growth.
