Financial experts and ordinary punters around the world have been waiting for the latest consumer credit numbers to be released in the US. The numbers are out and although on a surface they give us lots of reasons to be happy, as we dig deeper, we discover a worrying trend.

A positive shift was predicted in November; and the predictions came true a few days ago and with the release of stats for December – the US consumer credit is coming back – it’s now official! To make sure we get this right, there are two parts within the total consumer credit – revolving credit (for example credit cards) and non-revolving credit (for example auto loans and consumer loans). With non-revolving credit there’s a strong upwards tendency. In fact, the non-revolving credit in the US has hit a $1.61 trillion mark in December 2010, which is more than in the immediate pre-crisis month of July 2008.

Personally, as I’m involved in the automotive industry, my first reaction is: Brilliant! On the backdrop of the reports about a slight earnings growth in December (wherever they got those figures from…), car sales are slightly up, and obviously car finance follows. But will our joy be short-lived? It depends on several factors – but mainly – how prudent will people be with borrowing and spending.

The average car loan rate is down from 6.5% (early 2010) to less than 5% now. It is likely the average rate will continue to decrease slightly into 2011. Although it would make sense to increase the rate in order to curb peoples’ spending, nobody will do that as auto industry is too important for America which is only just showing the first signs of economic recovery.

Because of the recession, the army of potential sub-prime customers has increased; and while a person with bad credit history would be declined a mortgage, car dealers and car finance brokers are very likely to be able to offer them a fairly reasonable deal.

That’s why we see a situation where a person whose home is subject to foreclosure can theoretically pop into the nearest auto dealer centre and drive away in a brand new car. It should be noted that although the average auto loan rate is below 5% it will be nowhere near that for sub-prime market – expect the rate to be closer to 20% for the bad credit customers, which all in all is not very appealing.

Encouraging consumer spending is an essential thing to get the economy back on track, however, overconfidence could pull us back into recession. No panic-mongering here, it’s just worth remembering that reckless borrowing got us into trouble in 2008 – And I really hope we’ve learned our lesson!

The statics provided for revolving consumer credit data shows that we might have. People are generally more cautious when it comes to applying for another credit card. It is estimated that the amount of revolving consumer credit reached $800 billion in December 2010. This is encouraging as it is early $174 billion less than in July 2008.

Experts are hoping to see another slight increase in credit numbers in January. We do mean ‘slight increase’ as well as a jump would probably mean that the bad spending habits are re-emerging!

Written by John Williams, A car finance writer for John is an avid car enthusiast and he enjoys watching global economy trends and making bold predictions.