The evidence is piling up that the economy is bursting out of the winter doldrums, as basically all of the May economic data has been hot.
The latest evidence comes from what may be the most important source of all: The credit markets. Specifically, credit expansion is accelerating.
On Friday we got fresh data on bank lending and consumer credit. The below chart shows the year-over-year change in loans and leases from commercial banks (red line) and revolving consumer credit, AKA credit card usage, in the blue line.
What’s clear is that both are on an upswing. Both measures made steady gains out of the slump, and then stalled out again. A new credit expansion would be crucial, as it would allow the economy to really gather steam, feeding on itself, and break out of the post-crisis slump.
To those who throw up their hands and say “oh great, more debt and credit, that’s just what we need,” the response is: well, yeah, credit is the lifeblood of the economy and banks are its beating heart.