Tyler Durden on consumer debt:
Remember that epic spending spree that took place in March when consumers cleaned out their savings account and which resulted in a surge in March retail spending in consumer outlays? Now we know that in addition to borrowing from their savings, consumers also “charged” it, because as we reported last month, the April consumer credit soared by an unprecedented $8.8 billion, the most since 2007, and a clear outlier in recent years. April, incidentally is precisely when the credit card statements for March purchases would come due so while impressive, the surge in revolving credit wasn’t quite surprising.
However, what is perhaps more notable now that the Fed just released the May consumer credit numbers, is that the month after the March spending spree, funding largely on credit, consumers hunkered down once more, and the May increase in revolving credit was a paltry $1.8 billion, much lower than the April surge, and the lowest since February. In other words, after the spending binge, came the credit card bills, and with them, the spending hangover.
Auto sales were way up in June, too, with the additional debt that implies. As we discussed on Monday, there was an increase in the percentage of questionable auto loans, with terms as long as six or seven years. So the debt consumers didn’t add to the Visa card in May, they tried to make up for with new auto loans in June.
Are you thinking what I’m thinking? The surge in part-time employment might be partially due to the fact that part-timers are cheaper and easier to get rid of, once the consumer debt merry-go-round stops spinning.