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 5/7/08 For Mar 2008 | ||||||||||||
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Highlights
Consumers borrowed heavily in March reflecting a soft jobs market, soft wage gains, declines in savings and heavy inflation. Consumer credit rose $15.3 billion in March, split between $6.3 billion for revolving credit and $9.0 billion for non-revolving credit. The rise in non-revolving credit is steep but is certain to slow in April given the month's unusually weak vehicle sales. The gain in revolving credit is the largest gain since November and suggests that fuel payments and grocery payments are stacking up on credit cards. Revolving credit rose at an annual rate of 6.7 percent in the first quarter, down from an even higher 8.6 percent in the fourth quarter. High interest rates on credit cards, which have not come down despite Federal Reserve rate cuts, also point to rising credit burdens in future months, as of course do unrelenting price increases for fuel and food.
Consumer credit growth slowed in February, to a rise of $5.2 billion from a steep $10.3 billion jump in January. Even revolving credit -- that is credit card use -- rose a more moderate $4.7 billion compared a gain of $5.6 billion in January. Non-revolving credit -- consisting mainly of auto loans -- rose only $0.5 billion, reflecting the month's weak vehicle sales. The consumer sector and credit growth are slowing due to fears of job losses, tighter credit, and less available home equity. But the growth of revolving credit relative to retail sales is important to watch to see if consumers are becoming more cash strapped for meeting daily needs such as higher priced groceries and gasoline.
Consumer credit Consensus Forecast for March 08: +$6.0 billion
Range: $3.0 billion to +$7.5 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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