The American consumer has made a triumphal return.
After several months of subdued increases in consumer credit, moments ago the Fed reported that in June, total consumer credit surged by the most on record, soaring by $37.69 billion, nearly double the consensus estimate of $23 billion. The monthly increase was a whopping 10.6% SAAR, pushing the total to a new record high of $4.319 trillion.
What was behind this stunning surge? Well, just as stimmies ran out, US household decided to shift from debit to credit cards, and splurged to a never before seen pace, pushing revolving credit, i.e., credit card debt, higher by a whopping 17.9$ billion, the biggest monthly increase on record, and pushing the total revolving debt back to just shy of $1 trillion or $992.2 billion.
This was to be expected: earlier this week we showed that according to the latest Senior Loan Officer Opinion Survey, credit terms for various products – and especially credit cards – just hit the loosest on record. Yes, it has never been easier to take out a credit card and abuse it with impunity.
Meanwhile, one month after non-revolving credit also jumped by a record, in June there was a modest slowdown in debt issuance on student and auto loans, and as a result nonrevolving credit rose by “only” $19.8 billion, which still was one of the highest monthly increases on record.
Looking at the composition of this increase, it will come as no surprise that both student and auto loans hit a new all time high, the former rising by just $4.1 billion to $1.732 trillion, while the latter surged by $41 billion as Americans went hog wild buying cars whose prices as everyone knows by now have hit an all time high.
This shift in spending patterns, means that things are now truly back to normal, and that with consumers shifting from spending using their debit cards (which is where the stimmy checks arrive) to instead going crazy with their credit cards, Americans are once again splurging wildly massively beyond their means, as they always tend to do just before there is a crash.