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Consumer Credit: Cars, Cards and College

July 8, 2016

Bottom Line: Consumer credit increased by a double-digit amount for the 5th consecutive month. The year-over-year rate of growth was little changed at 6.3%. Revolving debt increased for the 5th time in the last 6 months. Meanwhile, non-revolving debt rose sharply with about one-third of this increase being student loans. The consumer debt-to-disposable income ratio (ex-student loans) had declined from a peak of 23.4% in April 2004 to a trough of 17.7% in December 2012 as households deleveraged. The current reading is modestly higher at 18.9%.

Consumer Credit ROSE by $18.6 billion in May, compared with market expectations for an increase of $16.0 billion. Over the past year, consumer credit has increased by $214.4 billion or 6.3%.

Revolving Credit, including credit cards, ROSE by $2.3 billion. Over the past year, revolving credit has increased by $48.8 billion or 5.4%. Revolving debt is now close to its August 2009 levels but still 6.6% below its July 2008 peak.

Non-Revolving Credit, including auto and education loans, ROSE by $16.2 billion. Over the past year, non-revolving credit has increased by $165.6 billion or 6.6%. Of this amount, $101.1 billion, or 61.0%, appears to be due to increases in student loans held by the federal government. Non-revolving debt had been climbing fairly rapidly since mid-2010 but is now increasing moderately over the past year.

Article by contingentmacro