EC October 2014 Consumer Credit Growth Continues To Slow, Growth Well Below Expectations

Consumer credit growth has been trending down down after peaking in July. Even with the backward revisions changing trends, this particular trend has been in play for two months now. In any event, year-over-year growth (ignoring student loans) is still growing at double the rate of consumer contribution to GDP growth.

The headline said:

In October, consumer credit increased at a seasonally adjusted annual rate of 5 percent. Revolving credit increased at an annual rate of 1-1/4 percent, while nonrevolving credit increased at an annual rate of 6-1/4 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 -0.2% +6.7% -0.2% +4.0% Revolving -0.2% +3.2% n/a n/a Non- Revolving -0.1% +8.0% -0.2% +4.4%


Overall takeaways from this month’s data:

  • Student loan growth has been decelerating gradually for the last 2 years;
  • Student loans had little effect on Non-revolving credit growth as the data decelerated whether student loans were considered or not  – and revolving credit (credit cards and has no student loans) has been slightly accelerating for the last 5 months;
  • The backward revision this month as usual was significant enough to distort how one views the short term trends.
  • The market expected consumer credit to expand $12.0 to $20.0 billion (consensus = $16.8 billion) versus the seasonally adjusted headline expansion of $13.2 billion reported.

    Note that this consumer credit data series does not include mortgages.

    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;
  • this analysis expresses growth as year-over-year change, not one month’s change being projected as an annual change – which creates a lot of 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.
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    Author: Travis Esquivel

    Travis Esquivel is an engineer, passionate soccer player and full-time dad. He enjoys writing about innovation and technology from time to time.

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