US: Consumer Credit

Thu May 07 14:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $15.9B $14.0B to $20.0B $20.5B $15.5B $14.8B

Consumer credit rose $20.5 billion in March for the largest gain since July. Revolving credit was a respectable contributor to the gain, up $4.4 billion and pointing to increased use of credit cards. Non-revolving credit rose a very strong $16.2 billion reflecting demand for vehicle financing and also student loans which are counted in this category. Outstanding credit continues to climb at a steady pace though revolving credit, despite the latest rise, remains flat.

Market Consensus Before Announcement
Consumer credit is expected to once again show a strong increase with the Econoday consensus at $15.9 billion for March. But the gains have repeatedly been confined to the non-revolving component which is being inflated by the government's acquisition of student loans from private lenders. The revolving component, where credit cards are tracked, has been dead flat.

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.