US: Consumer Credit

January 9, 2017 02:00 CST

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $18.5B $12.0B to $20.0B $24.5B $16.0B $16.2B

A large increase in revolving credit, one of the largest of the cycle, is likely a positive indication for holiday sales. Revolving credit jumped $11.0 billion in data for November to indicate that consumers are increasingly running up their credit-card debt. Non-revolving credit, up $13.5 billion, is also positive, here reflecting demand for vehicle financing and student loans (which are tracked in this report). Total credit rose $24.5 billion in the month, well above the consensus and also above Econoday's high estimate. Retail sales for December, to be posted Friday, will offer definitive data on the strength of holiday spending.

Market Consensus Before Announcement
Consumer credit is expected to rise $18.5 billion in November vs October's increase of $16.0 billion. Revolving credit, which is where credit-card debt is tracked, has been on the climb and is at a cycle high, at 6 percent annualized growth. Non-revolving credit remains the report's main source of growth, underpinned by student loans and also reflecting solid demand for vehicle financing.

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.