Understanding the Federal Reserve Consumer Credit Report

As real estate professionals it is imperative that we understand why consumer credit is so significant  to our economy.  Consumer credit involves the amount of debt that is incurred by people for the purpose of purchasing a good or services. Credit allows customers to spend for larger items that cannot simply be bought with cash such as cars, appliances, furniture and other bulky durable goods. Spending for tuition and vacations also affect the availability and cost of credit. This means that credit availability is directly related to consumer spending which accounts to nearly 70% of our gross domestic output (GDP), or the total output of the economy of the U.S.

One of the best sources for monitoring the changes in consumer credit is the Federal Reserve Consumer Credit Report. Also known as the G.19 monthly release, this report tracks overall consumer credit outstanding according to the prevailing terms as well as by lender type. Knowing this type of data offers a valuable source of current information on consumer credit conditions allowing economists and borrowers important insights on the ease and difficult of obtaining credit.

The most current report provided by the Federal Reserve indicates that consumer credit increased at a seasonally adjusted annual rate of 5-1/4 percent. Revolving credit dropped at annual rate of ¼ percent, while non-revolving credit increased at an annual rate of 7-1/2 percent.

The increase in consumer credit means that the percentage of people who obtained loans has amplified. However, the decreased in revolving credit shows that loans, almost entirely made of credit card debt, was lessened. On the other hand, the increase in non-revolving credit signifies that consumers who obtained closed end installment  loans for large items such boats, trailers and auto loans improved.

Based on the recent consumer credit report, the economy's consumer credit standing improved from the previous month.   This is good news.   As real estate professionals we should examine these reports just as economists and analysts do and share our findings  with our clients about  how the signs of improvement in consumer credit could benefit the overall economy.   As the economy improves so does real estate property values.


A copy of the January 2014 Federal Reserve Consumer Credit Report can be found here: http://www.federalreserve.gov/releases/g19/current/default.htm

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