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US Consumer Credit Growth Pauses to Start 2016

Posted by Joseph Trevisani on Mar 7, 2016 5:22:51 PM

Consumer credit growth deaccelerated sharply in January as turmoil in U.S. and global markets may have induced a note of caution into American household spending.

Outstanding consumer credit rose $10.54 billion in January. It was the smallest monthly expansion since November 2013 and it followed December’s revised 21.38 billion extension, according to the Federal Reserve. Analysts had forecast a $17.0 billion increase. The 3.6 percent rate of annual growth was the slowest since March 2013 and less than half the 7.3 percent pace in December. 

Revolving credit, primarily credit card balances that have no set term or payment, fell $1.05 billion, as consumers elected to pay down charges at a negative 1.35 percent annual pace.   In December households had added $5.47 billion to their outstanding total, a 7.1 percent yearly expansion. It was the first decline in revolving credit since February 2015. 

Non-revolving credit, that is loans with a set amount, term and payments, mostly student and automobile loans, added $11.59 billion in January, down from $15.92 billion in December, a 5.4 percent growth rate in January compared with Decembers 7.34 percent.  

Overall credit growth has fallen substantially from its post-recession high of $28.47 billion last September. 

Until the recession revolving and non-revolving credit expansion was roughly equal. But starting in 2011, following the federal government takeover of student loans from private sources in 2010, the portion of student loans has soared. Since the beginning of January 2012 non-revolving debt has averaged 88.3 percent of the total addition to consumer credit each month and the bulk of that volume is  federally insured student loans. 

Consumer spending, which generates about 70 percent of U.S economic, slipped in the final months of 2015 but retsumed in the New Year according to the latest figures from the Commerce Department.

Wage growth in average hourly earnings in February was 2.2 percent higher in February from a year earlier, down from 2.6 percent in December and 2.5 percent in January.

 

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets Online Trading

Charts: Bloomberg

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