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 2/7/08 For Dec 2007 | ||||||||||||
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Highlights
Consumer credit rose a moderate $4.5 billion in December, well down from a $17.1 billion surge in November which reflected that month's very strong retail sales. But retail sales for December proved very weak and the indications, based on vehicle and chain-store sales, don't point to much improvement in January.
Credit increases in December were split about evenly between revolving and non-revolving. For January, vehicle sales were especially soft, pointing to slowing in non-revolving credit. Chain-store sales were better than vehicle sales and may feed January gains in the non-revolving category (credit cards). With the Federal Reserve slashing interest rates, consumers -- provided the labor market holds up -- may turn increasingly to credit, in what would, given the risk of recession, improve the economic outlook.
Consumer credit jumped $15.5 billion in November, following a modest $2.0 billion rise in October. Consumers turned to their credit cards as revolving credit jumped $8.8 billion vs. an already bloated $6.6 billion gain in October. Markets will be sifting through the detail to see if consumers are relying on credit cards to pay monthly expenses or whether consumers are making rational long-term purchases such as for motor vehicles.
Consumer credit Consensus Forecast for December 07: +$7.4 billion
Range: $4.0 billion to +$12.0 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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