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 3/7/08 For Jan 2008 | ||||||||||||
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Highlights
Consumer credit rose $6.9 billion in January, about as expected and reflecting a $7.0 billion rise in revolving credit. Given the month's soft store sales, the rise in revolving credit likely reflects usage at the gas station and, unfortunately, usage to pay ordinary bills. Non-revolving credit rose a mild $1.1 billion reflecting the month's weak vehicle sales. Rising usage of revolving credit may become a theme during what appears now to be an economic slowdown.
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. Credit increases in December were split about evenly between revolving and non-revolving. Looking ahead 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). While an increase in consumer credit can point to increased consumer confidence, it also can suggest that consumers are being forced to rely on credit cards to meet monthly bills. This is an issue the Fed will be debating - whether consumer credit growth is healthy or whether the growth reflects sick consumer balance sheets.
Consumer credit Consensus Forecast for January 08: +$7.3 billion
Range: +$1.5 billion to +$12.8 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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