US: Consumer Credit

Thu Dec 07 14:00:00 CST 2017

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $17.3B $16.0B to $19.5B $20.5B $20.8B $19.2B

Revolving credit has been on the rise indicating less reluctance among consumers to run up their credit cards and helping to lift consumer credit to a higher-than-expected gain of $20.5 billion in October. Revolving credit rose $8.3 billion in the month to $1.01 trillion total for the biggest monthly gain since November last year. Whether this reflects more than just a rising spending appetite but a decline in credit standards is a question that isn't likely to haunt retailers during the holidays who are hoping for a very strong season. Nonrevolving credit, which tracks vehicle financing and also student loans, rose $12.2 billion in the month to $2.79 trillion.

Market Consensus Before Announcement
Revolving credit has been on the rise which may be a positive for the holiday shopping outlook but a negative perhaps for credit standards. After increasing a sharp $20.8 billion in September, consumer credit is expected to rise $17.3 billion in October.

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.