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 4/7/08 For Feb 2008 | ||||||||||||
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Highlights
Growth in outstanding consumer credit slowed in February, at +$5.2 billion vs. a steep +$10.3 billion in January (revised from +$6.9 billion). Revolving credit, that is credit card use, rose $4.7 billion vs. a rise of $5.6 billion in January. Both of these gains are in the middle of trend but at a time when retail sales are slowing sharply. Non-revolving credit, that is mainly auto loans, rose only $0.5 billion reflecting the month's weak vehicle sales.
Slowing retail sales are helping to keep a lid on consumer credit growth, at least so far. But there is a risk that consumers, facing a tough jobs market, may end up relying on credit in order to make non-discretionary payments.
Consumer credit rose $6.9 billion in January, about as expected and reflecting a $7.0 billion rise in revolving credit which raises serious questions about consumer health. 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. With the exception of December 2007, revolving credit growth has been accelerating since mid-2007, suggesting that consumers are getting tapped out by rising food and gasoline costs and slowing employment growth. Watching the mix of consumer credit - non-revolving versus revolving - may give hints as to whether the consumer sector has any strength left.
Consumer credit Consensus Forecast for February 08: +$5.3 billion
Range: +$4.0 billion to +$7.9 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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