Understanding Changes in Credit Supply and Demand

04/01/2010

Tags: Decision Analytics,

The U.S. economy has experienced a record drop in consumer borrowing. Experian tracked a sample of credit-active consumers to show consumer deleveraging has occurred & demand for credit has declined.

Description

In 2009, the U.S. economy experienced a record drop in consumer borrowing. According to the Federal Open Market Committee meeting notes released on Jan. 27, 2010, household spending ?remains constrained by a weak labor market, modest income growth, lower housing wealth and tight credit [author?s emphasis].? The committee?s outlook for 2010 suggests that ?while bank lending continues to contract, financial market conditions remain supportive of economic growth?; however, ?economic recovery is likely to be moderate for a time [author?s emphasis].? In recent months, the contraction in lending has been largely attributed to consumers reducing leverage, or ?consumer deleveraging.? To understand the impact and implications of consumer deleveraging, Experian? tracked a sample of 426,185 credit-active consumers, representative of the credit population, over a six-year period from 2004 Q2 to 2009 Q2.

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