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 9/8/08 For Jul 2008 | ||||||||||||
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Highlights
Growth in consumer credit slowed sharply in July, at $4.5 billion for the smallest rise of the year. The +2.1 percent annualized rate is also the lowest of the year. June's increase was revised down more than $3 billion to $11 billion. Growth in revolving credit during July was below trend at $3.9 billion while growth in non-revolving credit slowed to $0.6 billion to offset an $8.8 billion jump in June. The recent rise in savings, tied to tax rebates, may have limited the need for consumers to borrow. But given contraction in the jobs market and limited access to the home equity market, consumers may soon be returning to personal loans and credit cards.
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 ahead. June's gain likely reflects gains in non-auto personal loans. July's number likely will reflect the winner of the cross currents of a dip in auto loans (at least until August) and consumers' increased reliance on credit cards to get by.
Consumer credit Consensus Forecast for July 08: +$8.8 billion
Range: $5.7 billion to +$10.0 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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