US: Consumer Credit

February 7, 2017 02:00 CST

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $20.0B $18.0B to $25.0B $14.2B $24.5B $25.2B

Growth in consumer credit slowed in December, to $14.2 billion vs an upward revised $25.2 billion in November. Revolving credit showed less life in December than prior months, rising only $2.4 billion vs November's $11.8 billion. Weakness here helps explain the general weakness in core shopping during December. Nonrevolving credit, reflecting demand for auto loans and especially student loans, rose an intrend $11.8 billion.

Market Consensus Before Announcement
Consumer credit is expected to rise $20.0 billion in December following November's outsized gain of $24.5 billion. Consumers are increasingly running up their credit cards based on the revolving credit component of this report which rose $11.0 billion November.

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.