US: Consumer Credit

Fri Aug 07 14:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $17.4B $14.0B to $19.5B $20.7B $16.1B $16.5B

Consumer credit is showing life and is now getting a boost from credit cards. Consumer credit rose a strong $20.7 billion in June and includes a strong gain of $5.5 billion for revolving credit which is where credit cards are tracked. Strength in credit card use may point to a special lift ahead for the nation's retailers. Non-revolving credit rose $15.2 billion reflecting strength for vehicle sales and also student loans which are tracked in this report.

Market Consensus Before Announcement
Revolving credit has been on the climb in the consumer credit report, offering a possible signal of deepening strength for consumer spending. Still, this report is dominated by the non-revolving component where the inclusion of student loans has been exaggerating gains.

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.