The Signs Sent by the Latest Data on New Consumer Lending

BRAZIL ECONOMICS - Report 27 Apr 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

With the economy in recession and unemployment rising, the natural expectation was that banks would be more conservative in extending new loans, with negative reflections on household consumption. However, the figures on new lending for the first quarter this year show expansion in relation to the previous quarter. But unlike what a superficial reading of the data might indicate, this growth does not mean recovery supported by increased household consumption. The reason is that the increase in new lending is totally explained by greater use of credit cards and check overdraft facilities, which have pre-approved limits and can be characterized as “urgent credit”, not by new lending directly connected to financing of consumer goods.

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