November 2018 Headline Consumer Credit Growth Slowed

Year-over-Year Growth Rate Student Loans (Government Plus Private Sector)

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The market expected (from Econoday) consumer credit to expand $15.0 B to $29.0 B (consensus = $19.0 billion) versus the seasonally adjusted headline expansion of $22.1 billion reported.

Note that this consumer credit data series does not include mortgages. However, most of the consumer credit is used for retail sales - and the following graph shows the relationship indexed to the end of the Great Recession.

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The Econintersect analysis is different than the Fed's:

  • an effort is made to segregate student loans from consumer credit to see the underlying dynamics; Note that we are only using 70% of the value of student loans issued as only the US government accounts are up to date - and the Fed's total student loan account (SLOAS) is only issued quarterly. The trend lines are normally representative.
  • this analysis expresses growth as year-over-year change, not one month's change being projected as an annual change which creates significant volatility and distortion.
  • where our analysis expresses the change as month-over-month, month-over-month change is determined by subtracting the previous month's year-over-year improvement from the current month's year-over-year improvement.

The commonality between the Fed and Econintersect analysis is that consumer credit is expanding whether one considers student loans or not. The difference is how we look at the RATE of growth.

Since the Great Recession, much of the increase in consumer credit had been from student loans. The following graph shows the flow into consumer credit including student loans (blue line) against the flow into student loans alone (red line).

Flow of Funds into Consumer Credit - Total Consumer Credit (blue line) vs Student Loans (red line)

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Another way to view the effects of student loans on consumer credit is to view the year-over-year growth in $ billions of student loans as a percent of total consumer credit (including student loans). In short, student loans accounted for all consumer credit growth from 2009 to late 2011. The year-over-year growth of consumer credit is shown as the blue line in the graph below.

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