March 2018 Headline Consumer Credit Growth Rate Little Changed

The headlines say consumer credit rate of annual growth insignificantly declined from last month. Our analysis sees little change in growth since last month.

Analyst Opinion of the Consumer Credit Situation

There was a modest downward revision of 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.

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 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 the graph below) over the last year.

Last month’s headline said:

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

This month’s headlines said:

Consumer credit increased at a seasonally adjusted annual rate of 4-1/4 percent during the first quarter. Revolving credit decreased at an annual rate of 1 percent, while nonrevolving credit increased at an annual rate of 6 percent. In March, consumer credit increased at an annual rate of 3-1/2 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 % +5.1 % +0.0 % +3.6 % Revolving -0.6 % +5.0 % n/a n/a Non- Revolving +0.2 % +5.1 % +0.4 % +2.7 %

Overall takeaways from this month’s data:

Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 – but this month the deceleration was insignificant and roughly similar to the movement of total consumer credit.

Student loans growth rate (US Government owned) decelerated 0.0 % month-over-month and year-over-year growth is 8.6 % year-over-year which is over double the growth of consumer credit less student loans.

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.