Q4 GDP Growth Expected To Be 0.73%

Consumer Credit Disappoints

Monthly growth in consumer credit missed estimates sharply in September. In August, monthly growth was revised from $17.9 billion to $17.8 billion. As you can see in the chart below, there was only a $9.5 billion increase in consumer credit. It missed estimates for $15 billion and missed the low end of the consensus range at $13 billion. And it was the lowest monthly growth since June 2018. Annualized growth fell from 5.2% to 2.8% which is the lowest reading since June 2018.

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Results are less dramatic when you look at yearly growth as it fell from 3.8% to 3.5%. Changes in debt growth was all about the decline in student and auto loan growth. Specifically, revolving debt, which is credit card debt, fell $1.1 billion in September after falling $2.2 billion in August. 2019 has had 4 months where credit card debt has fallen. 

The latest declines could be related to pairing down debt before the holiday shopping season. The quarterly average isn’t negative though. The last time it was negative was in Q2 2012. This revolving reading probably isn’t something to worry about yet.  

Changes in non-revolving credit growth caused this sequential decline as revolving debt fell less than in August. In September, non-revolving debt growth was $10.6 billion after rising $20 billion in August. That was the smallest gain in 4 months. Yearly growth in non-revolving debt fell from 5.5% to 5.4%. 

If you’re curious about the breakdown between student loans and auto loans, outstanding student loans were up from $1.61 trillion in Q2 to $1.64 trillion in Q3. Outstanding debt for vehicle loans increased from $1.17 trillion to $1.19 trillion. In other words, the sequential increase was near equal. Consumer credit report doesn’t track housing debt. Housing leverage has declined sharply this cycle.

Slight Improvement In Consumer Sentiment

University of Michigan consumer sentiment report improved very slightly in its preliminary November reading. It increased from 95.5 to 95.7 which missed estimates for 96. Since the report has been solid, this slight improvement should be considered decent news.  

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