|Consumer Credit - M/M change||$15.0B||$10.0B to $17.0B||$11.6B||$14.8B||$17.9B|
Consumer credit rose $11.6 billion in January vs an upwardly revised gain of $17.9 billion in December. Consumers did go to their credit cards in December, when the revolving credit component rose $6.2 billion, but not in January as the component fell $1.1 billion. As always, the data were boosted by the non-revolving component which rose $12.7 billion reflecting strength in auto financing and the government's acquisition of student loans. Today's jobs report underscores the strength of the consumer who, boosted also by low gas prices, has less and less reason to turn to credit card debt to fund purchases.
Market Consensus Before Announcement
Consumer credit outstanding rose $14.8 billion in December but the real headline was in the revolving credit component which jumped $5.8 billion. This is a very big jump for this component which typically shows not much of a monthly change at all. Non-revolving credit, which typically shows strong gains on vehicle financing and student loans, rose $9.0 billion.
The dollar value of consumer installment credit outstanding. Changes in consumer credit indicate the state of consumer finances and portend future spending patterns.
Growth in consumer credit can hold positive or negative implications for the economy and markets. Economic activity is stimulated when consumers borrow within their means to buy cars and other major purchases. On the other hand, if consumers pile up too much debt relative to their income levels, they may have to stop spending on new goods and services just to pay off old debts. That could put a big dent in economic growth.
The demand for credit also has a direct bearing on interest rates. If the demand to borrow money exceeds the supply of willing lenders, interest rates rise. If credit demand falls and many willing lenders are fighting for customers, they may offer lower interest rates to attract business.
Financial market players focus less attention on this indicator because it is reported with a long lag relative to other consumer information. Long term investors who do pay attention to this report will have a greater understanding of consumer spending ability. This will give them a lead on investment alternatives. Also, during times of distress in credit markets, consumer credit can give an idea about how willing banks are to lend.
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