November 2018 Headline Consumer Credit Growth Slowed

The headlines say consumer credit rate of annual growth declined relative to last month. And again, the previous month's total outstanding credit was revised significantly down.

Analyst Opinion of the Consumer Credit Situation

Not only does this data set suffer from backward revision (at times 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.

  • that the amount of consumer credit outstanding relative to consumer expenditures is near 21st-century highs.
  • Household Debt Payments As A Percent of Disposable Income is near all-time lows.
  • If one removes student loans - and adjusts for inflation - then there is little year-over-year growth.

A quick look at what is going on is summarized in the graph below which shows a gentle deceleration of consumer credit (blue line in the graph below) over the last year.

(Click on image to enlarge)

Last month's headline said:

In October, consumer credit increased at a seasonally adjusted annual rate of 7-3/4 percent. Revolving credit increased at an annual rate of 10-3/4 percent, while nonrevolving credit increased at an annual rate of 6-3/4 percent.

This month's headlines said:

In November, consumer credit increased at a seasonally adjusted annual rate of 6-3/4 percent. Revolving credit increased at an annual rate of 5-1/2 percent, while nonrevolving credit increased at an annual rate of 7 percent.

Econintersect's view:

Unadjusted Consumer Credit Outstanding

(Click on image to enlarge)

Overall takeaways from this month's data:

  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 - but in the past year, there has been little change in the rate of growth.
  • Student loans growth rate (US Government owned) accelerated 0.2 % month-over-month and year-over-year growth is 8.3 % year-over-year [note that the data last month was revised downward and in reality, we are now where we thought we were last month].
  • Revolving credit (e.g.credit cards - and this series includes no student loans) and had been slightly decelerating in Jan 2017.
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