In January, the slide in consumer credit appeared mild relative to the scale of the economic crisis, with the trend in balances tracking roughly in the middle of the trajectories set in the aftermaths of the five previous recessions.

Now, sapped by four additional months of extraordinary credit card chargeoffs, and with revisions of earlier data, only the performance after the 1980 recession looks perceptibly worse — and the economy was heading rapidly toward another downturn at that time (see chart below).

If June 2009 was the end of the Great Recession, outstanding consumer credit was 3.6% less after nine months of recovery, about the same performance as after the 1990-1991 recession. At an equivalent point after the 1980 recession — when the economy was three months away from slipping into the second phase of its double-dip slump — outstanding consumer credit was 4.1% less than at the end of the recession.

Though consumer credit continued to shrink in those two cycles for many months, some observers expect a sustained upturn this time in the relatively near future.

The Federal Reserve reported this month that consumer credit grew by a seasonally adjusted $2 billion in March, to $2.5 trillion, which exceeded the consensus expectation of a $3.9 billion reduction.

Nonrevolving consumer credit — mostly auto loans — actually grew at a 4% annual rate in the first quarter as vehicle sales firmed, but the unprecedented decline in credit card receivables roughly neutralized the lift.

Analysts at Moody's Investors Service Inc., however, believe that factors like increases in consumer spending, particularly on durable goods that are often financed with credit cards, point to an increase in such borrowing in the second half of the year as chargeoffs ease.

Still, improvement in personal incomes is needed for consumers to secure their finances without a further shedding of debt, and economists at Societe Generale AG have reckoned that, after the belt tightening of the past couple of years, scheduled principal payments will outpace new borrowing for the next few quarters.

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