July 2018 Headline Consumer Credit Growth Rate Little Changed

The headlines say consumer credit rate of annual growth improved from last month. We see almost no change in the rate of growth.

Analyst Opinion of the Consumer Credit Situation

There was a 0.2 % downward revision to the previous months’ data – so year-over-year growth is actually lower than last month.

Not only does this dataset suffer from backward revision (at times 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. [and this month the headline data shows very poor growth when the real year-over-year growth shows little change in the rate of growth from the revised data of last month]

that the amount of consumer credit outstanding relative to consumer expenditures is near 21st-century highs – but recently the rate of growth has slowed.

Household Debt Payments As A Percent of Disposable Income is near all-time lows but has been gently growing for the last two years.

If one removes student loans – and adjusts for inflation – then there is no growth year-over-year growth.

A quick look at what is going on is summarized in the graph below which shows a gentle deceleration of consumer credit (blue line in the graph below) over the last year.

Last month’s headline said:

Consumer credit increased at a seasonally adjusted annual rate of 4-1/2 percent during the second quarter. Revolving credit increased at an annual rate of 4 percent, while nonrevolving credit increased at an annual rate of 5 percent. In June, consumer credit increased at an annual rate of 3 percent.

This month’s headlines said:

In July, consumer credit increased at a seasonally adjusted annual rate of 5 percent. Revolving credit increased at an annual rate of 1-1/2 percent, while nonrevolving credit increased at an annual rate of 6-1/2 percent.

Econintersect’s view:

Unadjusted Consumer Credit Outstanding

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 0.0 % month-over-month and year-over-year growth is 8.4 % year-over-year.

Revolving credit (e.g.credit cards – and this series includes no student loans) and had been slightly accelerating since 2010. This month there was a deceleration in the rate of year-over-year growth.