CONSUMER CREDIT INDICATORS

Sep 21, 2026

Consumer Credit Indicators examines how consumer installment credit growth and repayment burdens evolved over time, emphasizing structural shifts within credit markets since 1979. Despite sluggish aggregate growth in real terms, the report finds different performance across creditor groups, with finance companies gaining market share. It concludes the consumer sector has not been overburdened by short-term debt, showing relatively stable debt-to-liquid-asset and repayment-to-income ratios while highlighting cyclical links between credit use, spending, and recoveries.

LanguageEnglish

CategoryResearch & Report

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Pages5

Reading Time13 min

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CONSUMER CREDIT INDICATORS

Ratio of Consumer Installment Credit Outstanding to Consumer Sector's Liquid Assets

Employment, Income, and Spending

Consumer Installment Credit

Source:Federal Reserve Board The slowdown in consumer creditgrowth evident since 1979 masks someimportant structural shifts that havetaken place in credit markets during thepast few years. A1though aggregateconsumer credit growth has been sluggishduring this period(and has even beennegative in real dollar terms in thepast two years),not all creditors orcreditor groups have experienced thesame trends. In particular,consumercredit growth at finance companies hasnot slowed to the same extent as it hasat commercial banks and credit unions.As a result,there has been a noteworthystructural shift as finance companieshave gained market share relative tothese other consumer creditors.Much ofthis shift can be attributed to gains inautomobile financing by subsidiaries ofautomobile manufacturers as auto financ- # Shares of Consumer Installment Credit Outstanding(Percent,End of Quarter) ing became more expensive and lessattractive to banks and credit unionsforced to pay higher rates for deposits.However,finance companies have alsoincreased their market shares of mobilehome financing and of the large "allother"component. According to Federal Reserve fig-ures,the rate of growth of consumerinstallment credit outstanding peaked inthe second quarter of 1978 when itregistered an increase of more than 19percent in current dollars over thecorresponding quarter a year earlier.From that time,year-over-year growthslowed steadily until.it reached a rateof less than 1 percent in late 1980 andearly 1981. Siow growth has continuedsince then as the economy experiencedthe second recession in two years. ## Ratio of Consumer Installment Credit Outstandingto Consumer Sector's Liquid Assets National Consumer Finance Assoc. Percent Change In Consumer Installment Credit Outstanding,Year End(1972 Dollars,Seasonally Adjusted) Soure:Feberal keserve Board 0Tt:Percent change fron 0t1961. Ratio of Consumer Installment Credit Extendedto Personal Consumption Expenditures(By Quarter,Seasonally Adjusted Annual Rate) Snvrce:fedesl Resere Boerd,Deprtsent of comerce Ratio of Repayments of Consumer Insta11ment Creditto Disposable Personal Income ## CONSUMER CREDIT INDICATORS Regardless of popular preconceptions,availabledata indicate the consumer sector is not currentlyoverburdened with short-term debt. Review andupaate of earlier issues of Finance Facts(January-April 1982)produce the following conclusions: First,the consumer sector has maintainedinstallment debt outstanding at about 20 percent ofliquid assets(currency,demand deposits,and moneymarket mutual fund shares)since 1960.The range of181/2 to 19 percent for the four quarters of 1981is similar to the four quarters of 1960. Ratherthan indicating deviation from a norm,recent datashow continuation of a pattern that has been rela-tively constant for a generation.(Chart 1). Second,increases in consumers'current dollardebt levels during the 1970's were not necessarilyalarming. Much of consumer credit is used to pur-chase goods and services that provide high invest-ment returns for the user.Moreover,during periodsof high inflation,such as 1975-1980,economicindicators expressed in current dollars can bemisleading. When expressed in constant,or infla-tion-adjusted dollars,the growth of installmentcredit outstanding peaked in 1977,(well before theimposition of credit controls in 1980)and followeda cyclical pattern similar to that of the 1960's.(Chart 2). Third,there is a cyclical relationship betweeninstallment credit extended and personal consumptionexpenditures.It appears that consumers'credit usetends to dampen expansions before the peak and tosupport economic expansions early in recoveries.(Chart 3). Fourth,the burden of consumer credit measuredas the relation between repayments and disposablepersonal income has been relatively constant over along period.Consumers have maintained debt burdensmeasured this way at approximately the same levelfor many years,despite changing economic c

FAQs

What does the report say about whether consumers are overburdened by short-term debt?

The available data indicate the consumer sector is not currently overburdened with short-term debt, based on conclusions drawn from earlier Finance Facts issues.

How has consumer installment debt compared with consumers' liquid assets since 1960?

Installment debt outstanding has been maintained at about 20% of liquid assets since 1960, with 1981 showing a range of roughly 18.5% to 19% similar to levels seen in 1960.

Why is the article’s view of debt burden based on repayment and disposable personal income?

The report measures burden using the relation between repayments and disposable personal income and finds this ratio has remained relatively constant over a long period despite changing economic conditions.

Sep 21, 2026

Uploaded by Emma Wilson