U.S. consumer credit rises for first time in a year NOT!!

WASHINGTON (MarketWatch) -- In an encouraging sign for the economy, U.S. consumers increased their debt in January for the first time in a year, just the latest hint that household demand may be on an upswing.

Total seasonally adjusted consumer credit, a measure of total debt taken on by individuals, increased in January $4.96 billion, or at a 2.4% annual rate, to $2.46 trillion, the Federal Reserve reported Friday.

The Fed also revised the figure for December 2009 to a $4.6 billion decrease in total consumer borrowing. The Fed had previously reported a $1.8 billion decrease in December. The media was not going to offset the "positive" with this negative revision.

For the full year, consumer debt (seasonally adjusted) dropped by 4% to $2.45 trillion from $2.56 trillion in 2008.




Seasonal adjustments according to the U.S. Census Bureau
Seasonal adjustment is the process of estimating and removing seasonal effects from a time series in order to better reveal certain non-seasonal features. Examples of seasonal effects include a July drop in automobile production as factories retool for new models and increases in heating oil production during September in anticipation of the winter heating season.

The media was giddy with the unexpected increase in consumer debt. NOTE: the increase was purely due to seasonal adjustments (a.k.a applies a factor to the actual figures to make it look more palatable under the premise it smoothes out the volatility).

The actual non-seasonally adjusted number was a decrease of $4 billion versus the “smoke and mirrors” figure of plus $4.96 billion. This simply did not matter as the media and the equity market focused on the seasonally adjusted figure that was $9 billion more than the “real world” number. The transparent Federal Reserve reports an increase of $4.96 billion when the actual figure was NEGATIVE $4 billion.

Next time you deposit your paycheck, simply apply a seasonal adjustment factor to the deposit slip and see if your bank will credit your account $1,500 on a $1,200 check.