February 2017 Consumer Credit Headlines Say Year-Over-Year Growth Rate Nearly Doubled

The headlines say consumer credit rate of annual growth almost doubled from last month. Our analysis disagrees – and we see not only a higher growth rate, but also a rate little changed from last month.

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 data in February was not significantly different than January’s – and consumer credit growth is around 6.4% year-over-year.

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

that the amount of consumer credit outstanding relative to consumer expenditures is at all time highs,

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

Last month’s headline said:

In January, consumer credit increased at a seasonally adjusted annual rate of 2-3/4 percent. Revolving credit decreased at an annual rate of 4-1/2 percent, while nonrevolving credit increased at an annual rate of 5-1/2 percent.

This month’s headlines said:

In February, consumer credit increased at a seasonally adjusted annual rate of 4-3/4 percent. Revolving credit increased at an annual rate of 3-1/2 percent, while nonrevolving credit increased at an annual rate of 5-1/4 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 +0.1 % +6.4 % +0.1 % +4.9 % Revolving +0.3 % +6.5 % n/a n/a Non- Revolving +0.0 % +6.3 % +0.0 % +4.1 %

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 10.0 % year-over-year.

Revolving credit (credit cards (and this series includes no student loans) and has been slightly accelerating since 2010.

Year-over-Year Growth Rate Student Loans (Government Plus Private Sector – Not Current)