US: Consumer Credit

Fri Apr 06 14:00:00 CDT 2018

Consensus Consensus Range Actual Previous Revised
Consumer Credit - M/M change $15.1B $11.7B to $18.4B $10.6B $13.9B $15.6B

Consumer spending was soft in February and part of the reason was reluctance to run up credit cards. Revolving credit inched only $0.1 billion higher in February for the lowest result in 4-1/2 years. Nonrevolving credit, where student loans and vehicle financing are tracked, did rise $10.5 billion in the month which, however, is soft for this reading. Together they make for a $10.6 rise in total consumer credit which is well under Econoday's low estimate. These results point to a cautious consumer and hint at trouble for the consumer's contribution to first-quarter GDP.

Market Consensus Before Announcement
Another increase in consumer credit is the call for February, at a consensus $15.1 billion vs $13.9 billion in January. Credit card use had been on the rise but not in January's report as the revolving component showed only a small increase.

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.