Consumer Credit: Card Balances Lower Ahead of Gas Price Spike

Bottom Line: Revolving credit declined, countering expectations for an increase as consumers paid down balances in January. Revolving credit balances, mostly credit cards, remain well below the pre-pandemic levels as the benefit of direct stimulus payments to households has proven lasting. Consumers are now facing a major headwind as national average gasoline prices exceeded $4.06 this weekend, just a nickel below the highs seen in July 2008. But unlike during the financial crisis, consumers have significant room to use credit. While relying on consumer credit won't be a long-term strategy, there are few signs of any tightening of consumer credit in the short term. Overall, it appears the average household can weather higher gasoline prices better than in past cycles for at least the next several months.
 
Finally, nonrevolving credit, mostly student loans, rose a bit slower than the trend rate of the last year. Still, long-term structural concerns due to student loan burdens will remain a headwind for the consumer.Consumer Credit ROSE by $6.8 billion in January, compared with market expectations for an increase of $24.3 billion. However, the prior two months were revised higher by $4.0 billion. Over the past year, consumer credit has increased by $256.8 billion or 6.1%.
           
Revolving Credit, including credit cards, FELL by $0.2 billion. Over the past year, revolving credit has increased by $79.2 billion or 8.2%.
                           
Non-Revolving Credit, including auto and education loans, ROSE  by $7.1 billion.  Over the past year, non-revolving credit has increased by $177.5 billion or 5.5%. Of this amount, $52.6 billion, or 29.6%, appears to be due to increases in student loans held by the federal government.