December 2017 Headline Consumer Credit Growth Rate Little Changed

The headlines say consumer credit rate of annual growth declined from last month. Our analysis sees negligible change in the rate of growth.

Analyst Opinion of the Consumer Credit Situation

There was significant downward revision of the previous months’ data.

Not only does this data set suffer from backward revision (moderate to significant enough to change trends – such as this month), 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 year-over-year growth in 2017 slowed steadily from 6.6% to 5.4% in December.

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

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

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

Last month’s headline said:

In November, consumer credit increased at a seasonally adjusted annual rate of 8-3/4 percent. Revolving credit increased at an annual rate of 13-1/4 percent, while nonrevolving credit increased at an annual rate of 7-1/4 percent.

This month’s headlines said:

Consumer credit increased at a seasonally adjusted annual rate of 7-3/4 percent during the fourth quarter. Revolving credit increased at an annual rate of 9-3/4 percent, while nonrevolving credit increased at an annual rate of 7 percent. In December, consumer credit increased at an annual rate of 5-3/4 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 +0.0 % +5.4 % +0.1 % +3.8 % Revolving -0.2 % +6.0 % n/a n/a Non- Revolving +0.1 % +5.1 % +0.2 % +2.5 %

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 0.1 % month-over-month and year-over-year growth is 9.3 % 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 slight acceleration in the rate of year-over-year growth.