November 2016 Consumer Credit Headlines Say Year-Over-Year Growth Rate Accelerated

The headlines say consumer credit rate of annual growth increased from last month. Our analysis agrees.

Analyst Opinion of the Consumer Credit Situation

Not only does this data set suffer from backward revision (moderate to significant enough to change trends), but the use of compounding (projecting monthly change as annual change) by the Federal Reserve to determine consumer credit growth rates exaggerates the volatility in this data. This month the headlines showed accelerating consumer credit growth - and our analysis is that the rate of growth showed moderate growth..

  • the default rate of consumer loans is now marginally growing year-over-year,
  • that the amount of consumer credit outstanding relative to consumer expenditures is at all time highs,
  • Household Debt Payments As A Percent of Disposable Income is near all time lows.

Last month's headline said:

In October, consumer credit increased at a seasonally adjusted annual rate of 5-1/4 percent. Revolving credit increased at an annual rate of 3 percent, while nonrevolving credit increased at an annual rate of 6 percent.

This month's headlines said:

In November, consumer credit increased at a seasonally adjusted annual rate of 8 percent. Revolving credit increased at an annual rate of 13-1/2 percent, while nonrevolving credit increased at an annual rate of 6 percent.

Econintersect's view:

Unadjusted Consumer Credit Outstanding

  Month- over- Month Growth Year- over- Year Growth Month- over- Month Growth without Student Loans Year- over- Year Growth without Student Loans
Total +0.3 % +6.4 % +0.3 % +4.8 %
Revolving +0.7 % +6.9 % n/a n/a
Non- Revolving +0.2 % +6.2 % +0.0 % +3.7 %

Overall takeaways from this month's data:

  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 - although there was some acceleration this month.
  • Student loans growth rate (US Government owned) was up 0.3 % month-over-month and year-over-year growth is 10.6 % year-over-year.
  • Revolving credit (credit cards (and this series includes no student loans) and has been slightly accelerating since 2010.

Year-over-Year Growth Rate Student Loans (Government Plus Private Sector - Not Current)

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Comments

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Gary Anderson 2 years ago Contributor's comment

Yes, your last two #FRED charts show that consumer borrowing is actually a greater percentage of consumer spending than in the past. There is something dangerous about that, as you conclude, Steven.

Steven Hansen 2 years ago Author's comment

Agreed - to me it indicates that consumer spending growth is limited because of credit (especially with interest rates modest increase)

Charles Howard 2 years ago Member's comment

You've gotten it exactly right as usual, Steven. Thanks.