US: Consumer Credit

Mon Dec 07 14:00:00 CST 2015

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $20.0B $12.7B to $25.6B $16.0B $28.9B $28.6B

Revolving credit barely made it into the plus column in October, up $0.2 billion for what is, however, an eighth straight gain. Non-revolving credit, which in contrast to revolving credit hasn't posted a decline since April 2010, rose an intrend $15.8 billion, once again boosted by vehicle financing and also by student loans which are tracked in this component. But the gain on the non-revolving side couldn't offset the flat result for revolving credit as total consumer credit rose a lower-than-expected $16.0 billion in October. The slowing in the revolving component may not be pointing entirely to consumer caution but may reflect a lack of borrowing demand given the strength in the jobs market and the savings rate and also of course low gas prices which are leaving more money in consumer pockets. Still, the pause for revolving credit won't be lifting expectations for holiday spending.

Market Consensus Before Announcement
Consumer credit is expected to rise $20.0 billion in October following September's record $28.9 billion gain. The revolving credit component of this report, which had been dormant this cycle, has finally been showing steam and suggests that consumers are growing less reluctant to run up their credit cards. Nonrevolving credit has been strong the whole cycle, reflecting vehicle demand and also demand for student loans which are tracked in this report.

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.