Consumer Income and Debt

If we start with the premise that the consumer is almost 70 percent of GDP and that steel consumption is closely correlated with GDP, then consumer behavior and in particular debt is very relevant to our future businesses. Consumer spending is driven by income and both the perception of current debt and willingness to take on more. The Federal Reserve reports of personal income and credit outstanding are important pieces of the jigsaw puzzle of steel demand, past present and future.

The change in the mix of consumer debt between installment (big ticket items) and revolving (credit cards) since the recession has been remarkable. In the 24 months through March, installment loans have grown by 11.3 percent and revolving loans by only 1.9 percent, (Figure 1). Consumers have clearly learned their lesson regarding the predatory nature of credit card lending and this sector has barely expanded in over three years. Unfortunately, most of the growth in the installment sector has been for student loans.