September 2018 Headline Consumer Credit Growth Slows -

September 2018 Headline Consumer Credit Growth Slows

Nov 07, 2018Jeremy ParkinsonFinance0

The headlines say consumer credit rate of annual growth slowed relative to last month. Our analysis shows overall growth from last month.

Analyst Opinion of the Consumer Credit Situation

Not only does this data set suffer from backward revision (at times moderate to significant enough to change trends), but the use of compounding (projecting monthly change as annual change) by the Federal Reserve to determine consumer credit growth rates exaggerates the volatility in this data.

that the amount of consumer credit outstanding relative to consumer expenditures is near 21st century highs.

Household Debt Payments As A Percent of Disposable Income is near all time lows but has been gently growing for the last two years.

If one removes student loans – and adjusts for inflation – then their is little growth year-over-year growth.

A quick look at what is going on is summarized in the graph below which shows a gentle deceleration of consumer credit (blue line in graph below) over the last year.

Last month’s headline said:

In August, consumer credit increased at a seasonally adjusted annual rate of 6-1/4 percent. Revolving credit increased at an annual rate of 5-1/2 percent, while nonrevolving credit increased at an annual rate of 6-1/2 percent.

This month’s headlines said:

Consumer credit increased at a seasonally adjusted annual rate of 5-1/4 percent during the third quarter. Revolving credit increased at an annual rate of 2 percent, while nonrevolving credit increased at an annual rate of 6-1/2 percent. In September, consumer credit increased at an annual rate of 3-1/4 percent.

Econintersect’s view:

Unadjusted Consumer Credit Outstanding

Month- over- Month Growth Year- over- Year Growth Month- over- Month Growth without Student Loans Year- over- Year Growth without Student Loans Total +0.1 % +4.9 % +0.1 % +3.4 % Revolving -0.6 % +3.9 % n/a n/a Non- Revolving +0.3 % +5.2 % +0.5 % +3.1 %

Overall takeaways from this month’s data:

Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013.

Student loans growth rate (US Government owned) decelerated 0.1 % month-over-month and year-over-year growth is 8.3 % year-over-year.

Revolving credit (e.g.credit cards – and this series includes no student loans) and had been slightly decelerating beginning in Jan 2017. Year-over-Year Growth Rate Student Loans (Government Plus Private Sector)