Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

November 2017 Headline Consumer Credit Growth Rate Significantly Grows

Summary

The headlines would have you believe that consumer credit growth surged.

The reality is that the rate of growth modestly improved.

The compounding analysis by the Federal Reserve causes wild swings in consumer credit growth.

The headlines say consumer credit rate of annual growth SIGNIFICANTLY increased from last month. Our analysis sees only marginal improvement.

Analyst Opinion of the Consumer Credit Situation

You would have to be on drugs to believe consumer credit grew at 8.75% in November.

Not only does this data set suffer from backward revision (moderate to significant enough to change trends - such as this month), 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. The total consumer credit unadjusted growth in 2017 has been hovering around 6% year-over-year.

  • the default rate of consumer loans is now growing year-over-year,
  • 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.

Last month's headline said:

In October, consumer credit increased at a seasonally adjusted annual rate of 6-1/2 percent. Revolving credit increased at an annual rate of 10 percent, while nonrevolving credit increased at an annual rate of 5-1/4 percent.

This month's headlines said:

In November, consumer credit increased at a seasonally adjusted annual rate of 8-3/4 percent. Revolving credit increased at an annual rate of 13-1/4 percent, while nonrevolving credit increased at an annual rate of 7-1/4 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 % +5.5 % +0.2 % +3.9 %
Revolving +0.1 % +6.2 % n/a n/a
Non- Revolving +0.2 % +5.2 % +0.2 % +2.5 %

Overall takeaways from this month's data:

  • Student loan year-over-year growth rate has been decelerating gradually since the beginning of 2013 but accelerated this month.
  • Student loans growth rate (US Government owned) accelerated 0.2 % month-over-month and year-over-year growth is 9.3 % year-over-year.
  • Revolving credit (e.g.credit cards - and this series includes no student loans) and had been slightly accelerating since 2010. This month there was a slight acceleration in the rate of year-over-year growth.

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

The market expected (from Bloomberg) consumer credit to expand $14.0 B to $22.5 B (consensus = $18.0 billion) versus the seasonally adjusted headline expansion of $31.3 billion reported.

To read the rest of the analysis - [here]

Other Economic News this Week:

The Econintersect Economic Index for January 2018 Economic Index improved and remains in territory associated with stronger economic growth.

Bankruptcies this Week from bankruptcydata.comnone

Please visit our landing page to view a summary of all of our analysis this past week.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.