When looking at recent FRB data on consumer loans an interesting set of values pop out. We look here at two elements, first the auto loan segment and then the total loan pool.
First the auto stats on key ratios. We show these below.
It should be noted in the above that only interest rates appear to have made any substantial change.
Second is the total amount financed on an annualized basis as shown below.
There are swings in the annualized rates but no clear pattern. August 2009 looks like there was a drop but one wonders where the Cash for Clunkers fits in this number.
We then look at the total funds loaned. These are shown below.
There is no clear pattern just looking at the above. Yet if we look at percent changes we see that there is. Thus we look at the change in loans made over this period. This we show below.
This is where we see the dramatic change in numbers. In a post at Zero Hedge they state:
"As you can see in the chart, even at the depths of any recession of the last half-century plus, year over year credit demand by the private sector has always been in positive territory. We’re currently breaking new ground. And this new ground begs the question, is Fed monetary policy impotent? Here we have the lowest Fed funds rate of a generation, and credit is contracting. Completely the opposite of what we have experienced in prior cycles. It could not be clearer. We are convinced this key fact is simply not getting the attention it deserves. Moreover, we need to remember that government stimulus efforts have been focused on reviving credit demand as of late. C4C (cash for clunker) and the tax credit for home buying was the sheep’s clothing used in an attempt to spark credit reacceleration. Crazily enough, despite the success of C4C in August, non-revolving (largely car loans) consumer credit balances actually shrank in the month! Not even C4C could offset the power of household balance sheet reconciliation. That’s a very loud message."
We believe that this is of great concern. There is clearly a continuing contraction of credit, due most likely to demand rather than supply. We have shown before that the excess reserves are considerable. This most likely will add weight to the slow recovery.
First the auto stats on key ratios. We show these below.
It should be noted in the above that only interest rates appear to have made any substantial change.
Second is the total amount financed on an annualized basis as shown below.
There are swings in the annualized rates but no clear pattern. August 2009 looks like there was a drop but one wonders where the Cash for Clunkers fits in this number.
We then look at the total funds loaned. These are shown below.
There is no clear pattern just looking at the above. Yet if we look at percent changes we see that there is. Thus we look at the change in loans made over this period. This we show below.
This is where we see the dramatic change in numbers. In a post at Zero Hedge they state:
"As you can see in the chart, even at the depths of any recession of the last half-century plus, year over year credit demand by the private sector has always been in positive territory. We’re currently breaking new ground. And this new ground begs the question, is Fed monetary policy impotent? Here we have the lowest Fed funds rate of a generation, and credit is contracting. Completely the opposite of what we have experienced in prior cycles. It could not be clearer. We are convinced this key fact is simply not getting the attention it deserves. Moreover, we need to remember that government stimulus efforts have been focused on reviving credit demand as of late. C4C (cash for clunker) and the tax credit for home buying was the sheep’s clothing used in an attempt to spark credit reacceleration. Crazily enough, despite the success of C4C in August, non-revolving (largely car loans) consumer credit balances actually shrank in the month! Not even C4C could offset the power of household balance sheet reconciliation. That’s a very loud message."
We believe that this is of great concern. There is clearly a continuing contraction of credit, due most likely to demand rather than supply. We have shown before that the excess reserves are considerable. This most likely will add weight to the slow recovery.
Posts
