Consumer Credit - G.19

Revisions

September 10, 2012 revisions

Since 1955, the Federal Reserve has surveyed the finance company industry at five-year intervals to provide a comprehensive and accurate statistical snapshot of finance company lending to U.S. consumers and businesses. In recent years, a two-stage survey has been undertaken. First, the Census of Finance Companies (CFC) is conducted to identify the universe of such companies and to obtain information on the general characteristics of those firms. Second, the Survey of Finance Companies (SFC) is conducted to obtain more detailed data on the balance sheets and outstanding receivables of eligible firms identified in the CFC. The most recent CFC and SFC were conducted in 2010 and 2011, respectively. These surveys also serve as the benchmark for the monthly finance company data that the Federal Reserve collects from a smaller set of companies (FR2248). This data collection is an integral input into the Federal Reserve’s Consumer Credit (G.19), Finance Companies (G.20), and Flow of Funds (Z.1) statistical releases.

Because administrative data and comprehensive private data are not available to serve as a sample frame for finance companies, the Federal Reserve developed a procedure for identifying the industry universe of eligible firms within a list sample frame obtained primarily from a third-party private company and, to a lesser degree, from other sources. The CFC questionnaire (FR3033p) was mailed to each company on the list. A large-scale nonresponse follow-up study was designed and undertaken to assess the nature of nonresponse in the CFC as well as the effects of nonresponse on the universe estimate. With the information collected from the CFC and the nonresponse follow-up study, an estimate of the universe of U.S. finance companies with respect to company size and loan specialization was constructed. The subsequent SFC (FR3033s) was sent to all of the identified finance companies in the CFC, collecting detailed information on company balance sheets and receivable portfolios as of December 31, 2010. Analysis weights were constructed for companies in the SFC (after taking into account survey nonrespondents), and the finance company industry universe statistics of balance sheet and receivable portfolios (referred to as the benchmark estimates) were estimated and employed to benchmark the monthly and quarterly finance companies statistics.

Because of the benchmarking process, the G.19 data have been revised from December 2010 forward. Due to changes in the representativeness of the monthly sample since the earlier benchmark in 2005, there are considerable discrepancies in some categories between the pre-benchmarked and the benchmarked estimates. Such discrepancies are reflected in the statistical releases as series breaks in December 2010 (the benchmarking month). ¹ Therefore, the level differences between November and December 2010 due to benchmarking discrepancies do not affect the published growth rates of the corresponding series over this period. Also, analysis weights of the monthly longitudinal sample were re-estimated using the benchmarked industry universe statistics, and the monthly estimates after December 2010 were revised accordingly using the new weights.

June 7, 2012 revisions

Total Consumer Credit

Estimates of total consumer credit have been revised downward between January 2006 and March 2012, beginning with a series break of approximately negative $28 billion in January 2006. In all periods through March 2012, revisions are downward and relatively small, averaging slightly less than 1 1/4 percent of their former values. These changes are driven by larger downward revisions to nonrevolving credit, offset partially by upward revisions to revolving credit. Over the revision period, the new estimates are on average about $27 billion below the old estimates. Toward the end of the revision period, from March 2011 through March 2012, the gap is tighter, caused by a slight contraction in the downward revisions of nonrevolving credit and a slight expansion in the upward revisions of revolving credit. The average revision over this period is approximately negative $18 billion.

Nonrevolving Consumer Credit

Revisions to nonrevolving consumer credit are caused almost entirely by downward revisions to the nonfinancial business and securitized pools sectors. The average revision from January 2006 through March 2012 is slightly greater than 3 1/2 percent of its former value, with the new estimates staying relatively close to their average value of $55 billion below the old estimates. In the last two years of this period, the revisions contract moderately. From March 2010 through March 2012, revisions average about negative $53 billion, owing to upward revisions to the finance company sector.

Revolving Consumer Credit

Upward revisions to revolving consumer credit are due mainly to nonfinancial business. Prior to March 2010, securitized pools contribute positively to the revisions, while corresponding declines in finance company estimates somewhat damp their effect. After March 2010, finance companies contribute positively, while offsetting declines of securitized pools estimates somewhat damp their effect. The average revision from January 2006 through March 2012 is slightly less than 3 1/4 percent of its former value, with most revisions about $27 billion above the old estimates. In March 2010, the gap widens somewhat because of adjustments for the accounting rule changes, Statements of Financial Accounting Standards (FAS) Nos. 166 and 167, which cause finance company estimates to jump by more than the offsetting decline of securitized pools.

Nonrevolving Consumer Credit Sectors

Nonfinancial Business

Revisions to nonrevolving credit from nonfinancial businesses are large and negative, beginning with a 46 percent decline in January 2006. The average revision through March 2012 is 53 percent (negative $24 billion) and accounts for approximately half of the revision in overall nonrevolving credit. Revisions to nonfinancial business nonrevolving estimates are caused entirely by a change in source data. Previously, estimates of nonrevolving nonfinancial business credit were generated from retail sales data from the U.S. Census Bureau's Monthly Retail Trade Report. New estimates, from January 2006 on, have been benchmarked to accounts receivable data from the U.S. Census Bureau's Annual Retail Trade Report. These data are currently the most direct measure of consumer credit extended by nonfinancial businesses. Monthly movements are estimated using the typical seasonal pattern for nonrevolving credit.

Finance Companies

From 2006 through 2009, revisions of nonrevolving credit held by finance companies are relatively small. The average revision over this period is approximately 1/4 percent (negative $1 billion) and has essentially no effect on the overall downward revisions to nonrevolving credit. Alterations to this series are due to minor idiosyncratic methodology changes and the incorporation of revisions to source data. Methodological changes include improved adjustments for panel attrition, panel growth, and loan sales and purchases by panel members.

In the first quarter of 2010, the revisions increase in magnitude and can be attributed to the timing of the implementation of the accounting changes FAS 166 and 167 ². In previous estimates, we allowed early (before the first quarter of 2010) consolidations to appear in the data as they occurred. In the new G.19 estimates, we have suppressed all increases in on-balance-sheet data due to FAS 166 and 167 until March 2010. This change causes downward revisions of about 4 and 6 percent ($19 and $28 billion) in January and February respectively. In March 2010, prior consolidations are no longer suppressed, and a large amount of newly consolidated consumer motor vehicle loans contribute the entire amount of the revision of approximately 7 1/4 percent ($34 billion). Because the increase is due to consolidation, it is wholly offset by finance companies' corresponding contribution to the decline in credit in securitized pools and thus does not affect total nonrevolving credit.

From March 2010 through March 2012, the new estimates are about $35 billion higher than the old estimates. During this period, the new estimates also reflect minor idiosyncratic changes in methodology and the incorporation of revisions to source data.

Securitized Pools

Prior to March 2010, revisions to the nonrevolving pools estimates are downward and average approximately 11 1/2 percent (negative $25 billion). These revisions also make up a large part of the revisions to total nonrevolving credit, accounting for approximately half of its downward revisions from January 2006 through February 2010. Loans originated and securitized by depository institutions (specifically savings institutions) and finance companies cause the vast majority of these off-balance-sheet revisions, accounting for roughly 30 and 70 percent, respectively. These estimates of nonrevolving pools decreased from January 2006 through February 2010 because of data adjustments for both consumer motor vehicle and other nonrevolving loans. Upon review of the data and procedures used in this sector, adjustments have been made to ensure that all outstanding pool balances are correctly measured and loans are properly classified by type and holder.

From March 2010 through March 2012, revisions of credit in nonrevolving pools remain downward and increase in magnitude over time, averaging approximately 66 percent (negative $55 billion) of their former values. With respect to total nonrevolving credit, these revisions are largely offset by the corresponding upward revisions of finance companies.

Depository Institutions

The depository institutions sector consists of the former commercial banks and savings institutions sectors. Revisions to nonrevolving credit held by depository institutions are small, averaging less than 0.1 percent ($110 million) of their former values. These changes have a negligible effect on total nonrevolving credit and are caused almost entirely by a methodology change in weighting weekly commercial bank data to generate monthly estimates. In a few instances, alterations to this series are due to minor idiosyncratic data adjustments to better account for panel attrition, panel growth, and loan sales and purchases by panel members.

Credit Unions

Small revisions to credit union estimates are caused by revisions to source data. The new estimates are, on average, less than 0.1 percent ($117 million) below the previous estimates.

Federal Government

Nonrevolving credit held by the federal government is revised downward from January 2006 to March 2012 because of the exclusion of a small amount of student loans for which data are no longer available. These revisions average about 4 1/4 percent (negative $6.4 billion) of the former estimates over the revision period. In March 2012, these loans account for only 1 3/4 percent of the former federal government credit estimate.

Revolving Consumer Credit Sectors

Nonfinancial Business

Revolving nonfinancial business revisions are upward and large. In January 2006, the new estimate is higher by approximately $23 billion and nearly triples the old. The average revision from January 2006 through March 2012 is approximately 275 percent ($24 billion) and accounts for approximately 85 percent of the revision to overall revolving credit. These changes are caused entirely by a change in source data from a private trade publication to the U.S. Census Bureau's Annual Retail Trade Report. The Annual Retail Trade Report allows for consistent measurement of revolving and nonrevolving credit from nonfinancial business using one data source and encompasses a wide range of retail sectors, including furniture, electronics, appliances, food and beverage, gasoline, sporting goods, clothing, general merchandise, and department stores.

Finance Companies

Prior to March 2010, revisions of finance company revolving credit estimates are downward and average approximately 11 percent (negative $7 billion) of their former values. These adjustments are due to the incorporation of off-balance-sheet transfers that were not previously shown; corresponding increases occur in the revolving securitized pools sector.

In March 2010, the new estimate jumps above the old by roughly 31 percent ($20 billion) because of the inclusion of previously omitted consolidated loans. In terms of overall revolving credit, this upward revision adds to that of the nonfinancial business estimates, though it is partially offset by corresponding downward revisions of the securitized pools sector. The difference between the new and old estimates stays approximately constant at $21 billion through March 2012.

Securitized Pools

Revisions to revolving securitized pools are driven primarily by loans originated and securitized by finance companies and depository institutions and account for up to roughly 15 percent of the revisions to total revolving credit prior to March 2010. For the majority of this period, the revisions are upward, owing to nearly constant upward contributions of loans originated and securitized by finance companies. These changes are due to the inclusion of previously omitted securitized loans which are about 6 3/4 percent of the old estimate of total revolving pools. In March 2010, the newly included loans are consolidated in the finance companies sector and cause no further revisions to securitized pools.

These upward revisions are offset to varying degrees by revisions to loans originated and securitized by depository institutions. Both commercial banks and savings institutions contribute downward revisions before March 2010. Upon review of the securitized consumer loan market and procedures used to estimate securitized pools, estimates have been adjusted to ensure that all outstanding pool balances are correctly measured and loans are properly classified by type and holder.

Revisions to revolving securitized pools are largest beginning in the fourth quarter of 2009 (about $30 billion or 7 1/2 percent of their former values). These revisions reflect the timing of the incorporation of FAS 166 and167-related consolidations at commercial banks. In the previous estimates, consolidations before March 2010 appear in the data as they occur, causing a substantial decline in outstanding credit in securitized pools in the last quarter of 2009. In the new estimates, all declines in off-balance sheet data because of FAS 166 and 167 have been suppressed until March 2010. Note however, that corresponding increases in on-balance-sheet data have also been suppressed until March 2010, so the net effect of such revisions on total revolving credit is essentially zero.

Finally, from March 2010 on, both the new and old estimates fall sharply, with the new estimate falling to approximately 30 percent ($13 billion) below the old estimate. This downward revision in revolving pools is caused by data adjustments for consolidations which were not previously shown, and modestly offsets the upward revisions of total revolving credit from March 2010 through March 2012.

Depository Institutions

The depository institutions sector consists of the former commercial banks and savings institutions sectors. From January 2006 through September 2009, revisions to revolving credit held by depository institutions are small, averaging less than 0.1 percent of their former values (negative $146 million). These changes have a negligible effect on total revolving credit, and are caused almost entirely by a methodology change in weighting weekly commercial banks' data to generate monthly estimates. In a few instances, alterations to this series are due to minor idiosyncratic data adjustments to better account for panel attrition, panel growth, and loan sales and purchases by panel members.

In the last quarter of 2009, the new estimate drops below the old estimate by approximately $25 billion. This drop is caused by the timing of FAS 166 and 167-related consolidations at commercial banks. In the previous estimate, we allowed early (before the first quarter of 2010) consolidations to appear in the data as they occurred. In the new G.19 estimates, we have suppressed all increases in on-balance-sheet data because of FAS 166 and 167 until March 2010. The decrease in commercial banks' contribution to securitized pools is also suppressed until March 2010, so the net effect of these revisions on total revolving credit is essentially zero.

Beginning in March 2010, the revisions to depository institutions' credit shrink back toward zero and have an insignificant effect on total revolving credit.

Credit Unions

Minor revisions to credit union estimates are caused by revisions to source data. These revisions average less than 0.1 percent (negative $3 million) and have a negligible effect on total revolving credit.

Frequently asked questions

1. What do the new flow data represent?

   Flow data represent changes in the level of credit due to economic and financial activity, rather than breaks in the data series due to changes in methodology, source data, and other technical aspects of the estimation that could affect the level of credit.

2. Why did you choose to publish flow data?

   Publishing flow data allows users to calculate a growth rate of consumer credit that excludes breaks due to changes in methodology, source data, and other technical aspects of the estimation that could affect the level of credit.

3. How do I calculate the growth rate with flows?

   The seasonally adjusted annualized growth rate is calculated from annualized flow data as follows:

   

   Where is the annualized flow in month t and is the level in month t-1. If the flow is at a monthly rate, it can be converted to an annual rate by multiplying the monthly flow by 12.

4. Why does the seasonally adjusted growth rate published at the top of the G.19 differ in some periods from the growth rate computed from the seasonally adjusted level?

   The seasonally adjusted growth rate published at the top of the G.19 is calculated as the current seasonally adjusted flow of consumer credit, divided by the previous seasonally adjusted level. In periods that include a series break, this growth rate will differ from the growth rate calculated using only the level of consumer credit as the latter will reflect the break in the series.

5. Under what circumstances were breaks allowed?

   Breaks in the data series were allowed only to reflect significantly large changes in methodology, source data, and other technical aspects of the estimation that could affect the level of credit.

6. Are data prior to the start of the revision in 2006 comparable to data after the break?

   For most sectors, the data before and after the break are directly comparable. The underlying methodology change for Depository institutions, Finance companies, Credit unions and the Federal Government sectors is sufficiently small. The methodology change for nonfinancial businesses and securitized pools is significantly large so users should use caution when comparing trends prior to the start of the revision in January 2006 and after this date. For more information on the new methodology, see the G.19 release's "About" page.

7. Why is there a break in the seasonally adjusted level in December 2006?

   Prior to this revision, the Federal Reserve seasonally adjusted the level of consumer credit. Because with this revision the level of consumer credit may contain series breaks, seasonal patterns are now estimated using the flow of consumer credit. This change in seasonal adjustment methodology required a break in the seasonally adjusted level.

8. Why does the seasonally adjusted level equal the seasonally unadjusted level each December?

   The method for estimating seasonal patterns on the flow of credit requires the seasonal movements to fully offset each other over the course of an entire year, which implies that for one month of every year, the seasonally unadjusted level equals the seasonally adjusted level.

9. What happened to the Commercial banks and Savings institutions sectors? What is included in Depository institutions?

   The G.19 has been restructured to reflect regulatory filing changes for U.S.-chartered depository institutions. In particular, savings institutions now file the same regulatory report as the U.S.-chartered commercial banks. The U.S.-chartered commercial banks sector and the savings institution sector (previously shown separately) have been combined into a new sector called depository institutions. The previously published series for U.S.-chartered commercial banks and savings institutions are still available as separate series in the online Federal Reserve Data Download Program (DDP).