The Week In Review: Consumer Credit Growth Slowing

Summary

• Inflation-adjusted consumer credit growth has dropped below GDP growth for over one year if one removes student loans.
• Note that consumer credit does not include mortgages.
• It is student loans which remain with unsustainable growth.

The December Consumer Credit data shows consumer credit growth remains soft, and if one removes student loans - and adjusts for inflation - then the year-over-year growth is lower than GDP growth. Also this week there are two missed data sets because of the government shutdown.

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	+0.1 %	+4.7 %	+0.1 %	+3.3 %
Revolving	-0.5 %	+2.0 %	n/a	n/a
Non- Revolving	+0.3 %	+5.6 %	+0.4 %	+4.0 %

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Overall takeaways from this month's data:

• Year-over-year growth rate of student loans had been decelerating gradually since the beginning of 2013, but in the past year, there has been little change in the rate of growth.
• Student loan growth rate (US government owned) accelerated 0.0% month-over-month, and the year-over-year growth is 8.0% (Note that the data last month was revised upward).
• Revolving credit (e.g., credit cards - and this series includes no student loans) has been slightly decelerating in Jan. 2017.

Let's take a quick look at consumer credit rate of growth adjusted for inflation. Currently the rate of year-over-year inflation-adjusted consumer credit growth is 2.7% - unfortunately we do not know the 4Q 2019 real GDP growth - but in 3Q 2019 the year-over-year growth was 3.0%.

Focusing on student loans only, even though the rate of growth is slowing, it is still growing at an unsustainable rate.

Year-over-Year Growth Rate Student Loans

Overall, when ignoring student loans, consumer credit growth is currently growing at a sustainable rate. The following graph plots the year-over-year growth of consumer credit and GDP.

And for over one year, inflation-adjusted consumer credit is growing slower than GDP.

Economic Releases This Past Week

The Econintersect Economic Index for February 2019 insignificantly declined and remains below territory associated with normal expansions. The question remains whether this downward trend will continue. Note our index is built on data sets which were not affected by the government shutdown - and it is most likely that other recent economic forecasts you have seen fudged the missing data. A forecast with fudged data is simply a guesstimate.

The following table summarizes the more significant economic releases this past week. For more detailed analysis, please visit our landing page which provides links to our complete analyses.

Other Economic Release Summary For This Week

Release	Potential Economic Impact	Comment
January Conference Board Employment	n/a	Econintersect evaluates year-over-year change of this index (which is different than the headline view) - growth rate decelerated 1.5 % month-over-month and grew 3.4 % year-over-year. The Econintersect employment index marginally improved. The CB Employment Index was affected by the government shutdown: Due to the government shutdown, some of the components in this month's Employment Trends Index release were unavailable or biased. Note that Econintersect's employment index was not affected by the government shutdown.
November Factory Orders	Negative economic affect	According to the seasonally adjusted data, there was a general weakness in most areas except defense aircraft which where the major contributors to the decline. The data in this series is noisy, so I would rely on the unadjusted three-month rolling averages which declined. Remember the headline numbers are not inflation adjusted - and when inflation is factored in, there is little YoY growth. Backlog of orders shows no growth if one considers inflation.
December CoreLogic Home Price Index	Little affect economically	There was a continuation of home price moderation, falling now to 4.7% year-over-year. The authors of this index forecast home prices will increase by 4.6 percent on a year-over-year basis from December 2018 to December 2019.
November Trade Data	Unknown until next month's data is released	Trade data headlines show the trade balance worsened from last month, and the rolling averages for exports and imports remained in the ranges seen over the last 12 months. The data in this series wobbles and the three-month rolling averages are the best way to look at this series. The three-month averages slowed for exports and imports. Note that the headline numbers are not inflation adjusted - and if one adjusts for inflation, the year-over-year growth is less than economic growth.
4Q2018 Productivity	n/a	Data for this report, because of the government shutdown, was limited to manufacturing output, which is a tiny element in overall productivity. Basically, this report was worthless this month.
December Consumer Credit	Marginally negative	In 2018, consumer credit increased 5 percent, with revolving and nonrevolving credit increasing 2-3/4 percent and 5-1/2 percent, respectively. Consumer credit increased at a seasonally-adjusted annual rate of 6-1/2 percent in the fourth quarter and at a rate of 5 percent in December.
Surveys	Surveys trending lower	ISM and Markit Services Indices both declined this month and are near the bottom of values seen in the last 12 months.
Weekly Rail Counts	Trending lower	Rail has been flying high in 2019, and for the last two weeks, rail has been significantly contracting YoY. There is a correlation between rail growth and economic growth.

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This week the data is predominately showing a slowing economy.

My usual weekly wrap is in my instablog.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.