US: Consumer Credit


Wed Oct 07 14:00:00 CDT 2015

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $20.5B $18.0B to $23.0B $16.0B $19.1B $18.9B

Highlights
Revolving credit continues to show life, up a solid $4.0 billion in August for a sixth straight gain. Gains in this reading, which have been scarce this recovery, perhaps suggest that consumers are growing less reluctant to run up their credit cards, which would be good news for retailers going into the holidays. Non-revolving credit, driven by both vehicle financing and student financing which is tracked in this component, rose $12.0 billion to make for a headline increase of $16.0 billion.

Market Consensus Before Announcement
Consumer credit is expected to rise $20.5 billion in August but the key will be the revolving credit component which has posted a rare run of five straight gains to indicate rising use of credit card debt, which in turn signals greater confidence among consumers.

Definition
The dollar value of consumer installment credit outstanding. Changes in consumer credit indicate the state of consumer finances and portend future spending patterns.



Description
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.