US: Consumer Credit


Fri Sep 08 14:00:00 CDT 2017

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $16.0B $14.4B to $18.0B $18.5B $12.4B $11.8B

Highlights
Consumer credit rose a sizable $18.5 billion in July though revolving credit, which is where credit card debt is tracked, shows only a modest gain of $2.6 billion and is down from $4.8 billion in June. Nonrevolving credit, where student loans and vehicle financing are tracked, once again makes up the vast bulk of the headline increase, rising $15.9 billion. The slowing in revolving credit is not a plus for consumer spending but it may be a plus the financial sector's credit quality.

Market Consensus Before Announcement
Growth in consumer credit is expected to firm with the Econoday consensus calling for growth of $16.0 billion in July vs $12.4 billion in June. Revolving credit, where growth has been limited, is on the climb and raising questions whether financial firms are now lending to less qualified borrowers.

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.