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 12/7/07 For Oct 2007 | ||||||||||||
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Highlights
Consumer credit rose $4.7 billion in October, up from a $3.2 billion increase in September. Constraints on home equity credit continue to push consumers to their credit cards as revolving credit rose a sizable $6.4 billion vs. a $4.5 billion increase in September. The annual rate of increase in this category is in the high single digits, beyond the mid single digit gains for retail sales. Non-revolving credit dipped $1.6 billion after a $1.4 billion dip in September, both reflecting the months' sluggish vehicle sales. Consumers can fortunately turn to their paychecks, not just to their credit cards, to finance their spending, evidenced by today's average wage data that show a 3.8 percent annual gain. The consumer credit report doesn't get much play in the financial markets but Federal Reserve officials may pay attention as the more consumers fall into debt, the more sensitive they become to changes in interest rates.
Consumer credit in September rose a modest $3.7 billion, compared to a $15.4 billion jump 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 are not relying more heavily on credit cards to make everyday payments. Non-revolving credit rose $0.3 billion in the month, well down from $8.4 billion in August. A combination of factors could be behind the slower credit growth, including soft motor vehicle sales, consumer caution about spending, less growth in home equity, and financial firms lending at a slower growth rate due to illiquidity in the credit markets and over concern about consumers being overextended.
Consumer credit Consensus Forecast for October 07: +$9.0 billion
Range: $2.0 billion to +$11.3 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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