Latest Credit Data Shows Life

Contrary to how many people might feel, we have not actually been in a recession since December 2007.

The recession that began at the end of 2007 was one of the deepest and longest on record. But it officially ended in mid-2009. The subsequent recovery, though, has been so poor that it feels like the recession never ended.

The reality of a long-term under-performing economy has meant that banks have been less willing to lend (coupled with increased regulation), at the same time that loan demand has declined and been restrained among both businesses and consumers.

Two indicators reflecting this economic and credit reality are nonrevolving credit and revolving credit.

When the mortgage/credit mess hit in the summer of 2008, consumer credit outstanding dropped dramatically. For nonrevolving credit, that decline lasted to May 2010.

But revolving credit (overwhelmingly credit cards) kept falling through August of 2011.

However, the latest data released by the Federal Reserve on February 7 noted that both nonrevolving and revolving credit increased notably in both November and December.

Nonrevolving credit grew by a seasonally adjusted, annual rate of 10.7 percent in November and 11.8 percent in December.

Revolving credit was up by 8.4 percent in November and by 4.1 percent in December.

Along with the latest employment data, these numbers provide some hope that this anemic recovery might be gaining a bit more strength.

Of course, when things have been so bad for so long, it's easy to get a bit carried away. Keep in mind that since July 2008, nonrevolving credit is only up by 5 percent, and revolving credit is still down by 18 percent over the same period.

The hope that can be found in these latest consumer credit numbers, of course, would only grow and strengthen if policymakers stepped back from excessive taxation and regulation, and if it reined in the subsidies and political games that swirl around so much of the credit market, in particular home mortgages.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His new book is "Chuck" vs. the Business World: Business Tips on TV.