Great Graphic: Consumer Credit

Here is a Great Graphic from Zero Hedge.  It shows the history of the US consumer credit report since 2007.  It tends not to be a market-mover, but the unexpected decline in July has gotten the attention of many as the North American session winds down.  

The Bloomberg consensus was for a $9.2 bln increase.  Instead the Federal Reserve reported a $3.28 bln decline.

There were two mitigating factors.  First, the June series was revised sharply higher to $11.82 bln from $6.46 bln.  This means that some of the expansion of credit economists were looking for took place in June rather than July. 

Second, the decline in consumer credit was driven by a $4.82 bln decline in revolving credit, which is largely credit cards.  But this does not mean a decline in consumption.  In fact, we already know that retail sales rose an impressive 0.8% in July (which itself was twice the expected increase).   This was the first increase since March.   Retail sales, of course, is a subset of personal consumption.  We know that PCE rose 0.4% in July, the biggest increase since February. 

The August retail sales report will be released at the end of the week.  A rise in line with July's increase is expected.  We already know auto sales were a bit stronger than expected and some 40% above the 2009 bottom.  We also know that chain store sales were firm, even if not spectacular.  When stripped of autos, gasoline and building materials, to get the component that is used for GDP calculations, a more modest 0.4% increase is expected, following the 0.9% increase in July.   If the consensus is right, this will be the strongest two month period since the start of the year (Jan-Feb).