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 8/7/08 For Jun 2008 | ||||||||||||
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Highlights
Consumer credit surged $14.3 billion in June for the largest monthly gain since November. Surprisingly, the gain was centered in non-revolving credit which rose $8.9 billion for the largest jump since August. Car sales were unusually weak in June and even weaker in July, definitely pointing to lower non-revolving levels in the month ahead. June's gain likely reflects gains in non-auto personal loans. Revolving credit rose $5.5 billion, no more than an average increase suggesting that consumers, benefiting from tax rebates, are not depending on credit cards any more than usual to fund basic purchases -- at least not in June. The year-on-year percentage change for revolving credit continues to show easing, at 6.8 percent, but the year-on-year rate for non-revolving is the highest in three years at 6.6 percent. The inavailability of home-equity credit, the declining labor market, and the end of tax rebates point to rising credit needs and lower consumer spending ahead.
Consumer credit may be benefiting from government rebate checks as consumer credit outstanding rose a moderate $7.8 billion in May, the same increase as in April. Consumers may either be using cash instead of credit cards to a greater degree and/or may be using the rebate checks to pay down debt. But revolving credit was a little on the high side in May with a $5.7 billion gain in May. Also, weak light truck sales are another factor likely keeping consumer credit in check as non-revolving credit was up only a modest $2.1 billion compared to $8.2 billion in April and the smallest gain of the year. Once tax rebates fizzle out and unless gas and food prices ease, consumers in future months are likely to turn more and more to credit to make ends meet.
Consumer credit Consensus Forecast for June 08: +$6.4 billion
Range: $3.0 billion to +$7.0 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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