The dollar value of consumer installment credit outstanding. Changes in consumer credit indicate the state of consumer finances and portend future spending patterns. Why Investors Care
| Released on 11/7/07 For Sep 2007 | ||||||||||||
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Highlights
Consumers didn't dig themselves too much deeper into the hole in September according to consumer credit data that show a moderate $3.7 billion increase, vs. $15.4 billion in August and well down from trend. Revolving credit rose $3.4 billion in the month, also well down from trend and suggesting that consumers aren't relying more heavily on credit cards to make everyday payments. But quarterly data do show clear strains with revolving credit up a very steep 7.6 percent in the third quarter against a 5.8 percent rise in the second quarter. Non-revolving credit rose $0.3 billion in the month, well down from $8.4 billion in August. September's car sales were a bit weaker than August but do not explain the big drop back.
Consumer credit rose $12.2 billion in August, extending a long string of increases. The gain was split between revolving credit and non-revolving credit, the latter reflecting the month's strong vehicle sales. Vehicle sales have since leveled off and could slow credit growth. However, anecdotal reports of some consumers increasing the use of credit for everyday purchases could boost credit growth for worrisome reasons. While everyone knows housing is in decline, whether or not the consumer sector is in serious problems or not depends on the overall financial status of the consumer and not just on job growth. With housing equity growth flat and little or no growth in home equity for consumers to tap, markets should be paying closer attention to these types of reports for more insight into the health of the consumer.
Consumer credit Consensus Forecast for September 07: +$9.0 billion
Range: +$6.0 billion to +$10.0 billion
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The debt-to-income ratio shows how indebted consumers are relative to income. A rising ratio indicates that consumers are taking on greater debt burdens with respect to income growth. In a growing economy, this may not be dangerous. However, indebtedness could quickly become a problem if income and employment conditions turn around. The yearly change in debt outstanding shows yearly trends in debt growth and tends to be less volatile than the monthly change. |
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