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 6/6/08 For Apr 2008 | ||||||||||||
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Highlights
Consumer credit rose a moderate $8.9 billion in April reflecting a $8.7 billion jump in nonrevolving credit, a surprising jump given the month's very soft vehicle sales. The rise in nonrevolving credit is the largest since August. On the revolving side the news is good with only a $0.3 billion rise for the lowest reading since a contraction way back in May 2005. The reading suggests that consumers, benefiting from still solid wages, aren't piling up gas and food bills on their credit cards. Consumer credit has been tame so far this year despite the slowing jobs market and slumping home sector.
Consumer credit growth accelerated recently - and likely for reasons that reflect a worsening consumer sector rather than one purchasing with confidence. Consumers borrowed heavily in March, as consumer credit outstanding 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 was steep but is almost certain to slow in April given the month's unusually weak vehicle sales. The gain in revolving credit was the largest gain since November and suggests that payments for gasoline and groceries 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.
Consumer credit Consensus Forecast for April 08: +$7.4 billion
Range: $5.0 billion to +$10.5 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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