US: Consumer Credit


Mon Jan 08 14:00:00 CST 2018

Consensus Consensus Range Actual Previous
Consumer Credit - M/M change $18.0B $14.0B to $22.5B $28.0B $20.5B

Highlights
Consumers were heating up their credit cards in November as revolving credit, up $11.2 billion in the month, made a sizable contribution to total credit outstanding which rose $28 billion for a 17-year high. The rise in revolving credit is the second largest of the ongoing expansion and perhaps indicates less reluctance among the nation's consumers to run up their credit cards. And though it hints at momentum going into December's shopping, it may also revive talk of slackening credit standards. Nonrevolving credit, where auto financing and student loans are tracked, rose $16.8 billion which is also a sharp rise.

Market Consensus Before Announcement
Revolving credit has been on the rise indicating less reluctance among consumers to run up their credit cards. Revolving credit rose $8.3 billion in October for the biggest monthly gain since November 2015. Nonrevolving credit, which tracks vehicle financing and also student loans, rose $12.2 billion. After October's $20.5 billion increase, consumer credit is expected to rise $18.0 billion in November.

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.