US: Consumer Credit


Wed Feb 07 14:00:00 CST 2018

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $20.0B $14.0B to $22.0B $18.4B $28.0B $31.0B

Highlights
Consumer borrowing increased in December, up $18.4 billion vs an upwardly revised $31.0 billion in November which is the largest monthly increase since a break in the series 7 years ago. Revolving credit, a component that tracks credit-card debt, rose a sizable $5.1 billion following a November spike of $11.0 billion. On an annualized basis, revolving credit rose at a 6.0 percent pace in December.

Non-revolving credit rose at a 5.7 percent pace in the month and in month-to-month dollar terms rose $13.3 billion. Gains in this component, which is nearly triple the size of the revolving component, were split between student loans and especially vehicle financing.

The gain for revolving credit does suggest that those shoppers who are cash strapped turned to their credit cards to do their share to fund the holiday shopping season.

Market Consensus Before Announcement
Consumers are not only been dipping into their savings, they've also been drawing on their credit cards to an increasing degree as revolving credit rose $11.2 billion in November and made a sizable contribution to total credit outstanding which climbed $28 billion for a 17-year high. November's rise in revolving credit was the second largest of the post-2008 expansion and hints at less reluctance among consumers to run up credit-card debt. December's total consumer credit outstanding is expected to rise $20.0 billion.

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.