June 2018 Headline Consumer Credit Growth Rate Well Under Expectations

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

Analyst Opinion of the Consumer Credit Situation

There was an insignificant revision to the previous months’ data.

Not only does this data set 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]

the default rate on credit cards is growing year-over-year – and now higher than the levels when the Great Recession started.

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.

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 graph below) over the last year.

Last month’s headline said:

In May, consumer credit increased at a seasonally adjusted annual rate of 7-1/2 percent. Revolving credit increased at an annual rate of 11-1/2 percent, while nonrevolving credit increased at an annual rate of 6-1/4 percent.

This month’s headlines 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.

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 % +4.8 % -0.0 % +3.2 % Revolving -0.4 % +4.9 % n/a n/a Non- Revolving +0.1 % +4.7 % +0.2 % +2.2 %