April 2017 Consumer Credit Significantly Slowed

The headlines say consumer credit rate of annual growth slowed from last month. Our analysis agrees – and we see a moderately lower growth rate.

Analyst Opinion of the Consumer Credit Situation

Not only does this data set suffer from backward revision (moderate to significant enough to change trends), but the use of compounding (projecting monthly change as annual change) by the Federal Reserve to determine consumer credit growth rates exaggerates the volatility in this data. The total consumer credit unadjusted growth in 2017 has been hovering sightly around 6% year-over-year – and has been fairly stable.

the default rate of consumer loans is now growing year-over-year,

that the amount of consumer credit outstanding relative to consumer expenditures is near 21st century highs.

Household Debt Payments As A Percent of Disposable Income is near all time lows.

Last month’s headline said:

Consumer credit increased at a seasonally adjusted annual rate of 4-1/4 percent during the first quarter. Revolving credit was little changed, while nonrevolving credit increased at an annual rate of 5-3/4 percent. In March, consumer credit increased at an annual rate of 5-1/4 percent.

This month’s headlines said:

In April, consumer credit increased at a seasonally adjusted annual rate of 2-1/2 percent. Revolving credit increased at an annual rate of 1-3/4 percent, while nonrevolving credit increased at an annual rate of 3 percent.

Econintersect’s view:

Unadjusted Consumer Credit Outstanding

  Month- over- Month Growth Year- over- Year Growth Month- over- Month Growth without Student Loans Year- over- Year Growth without Student Loans Total -0.4 % +5.9 % -0.4 % +4.5 % Revolving -0.2 % +6.0 % n/a n/a Non- Revolving -0.4 % +5.9 % -0.6 % +3.7 %

Overall takeaways from this month’s data:

Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.

Student loans growth rate (US Government owned) decelerated 0.2 % month-over-month and year-over-year growth is 9.5 % year-over-year.

Revolving credit (e.g.credit cards – and this series includes no student loans) and has been slightly accelerating since 2010. HOWEVER, this is the seconod month there was significant deceleration in the rate of year-over-year growth.