Wisdom-Seeker

What Credit Crunch?

You're missing a few crucial quantitative details. First, the growth of credit should be adjusted for inflation and also per-capita, to get a sense of whether it's really growing or not in terms of an individual's actual purchasing power. Second, if you look at the Fed's G.19 source data you can see that the trend has keeled over dramatically. After increasing at an 8.0 percent rate (annualized, seasonally adjusted) in Q3 of 2007, consumer credit growth dropped to 4.0 percent in Q4, and over the last three months (Dec/Jan/Feb data), it is now down to just 2.8 percent AT A TIME WHEN INFLATION IS SPIKING.

My take on this is that consumers, reaching the end of their rope in the mortgage, HELOC and refi arenas (not part of this data set), grasped at as much credit as they could in the 3rd quarter and then ran out of room to borrow in the 4th quarter (remember, Christmas retail sales were awful).

My prediction is that you'll see the credit crunch show up in your data in the next 2 quarters.