G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES

Takeaway: More of the same. Credit card debt growth remains virtually non-existent, while student loan growth is incredible.

Revolving Credit

Credit card debt grew 1.1% year-over-year in October. This was a slight acceleration from the 0.8% year-over-year growth posted in September, but industry growth remains extremely lackluster. On a month-over-month annualized basis the growth was 4.7%, which is an improvement over September's -3.1% month-over-month annualized change. 

 

Nonrevolving Credit

Student loan growth accelerated again in October, growing 28.4% year-over-year up from 27.8% in September. We continue to view the bubble in student lending as entirely unsustainable, but as long at it's accelerating it is way too early to call for it to pop. Total nonrevolving credit, which includes auto loans and installment lending alongside student loans, rose 6.9% month-over-month annualized in October. This is weaker than the September change of 9.2% month-over-month annualized. 

 

We normally look at consumer credit based on the trends within its individual components, but it is also worthwhile to sometimes look at what total consumer credit is doing. To that end, total non-mortgage consumer credit grew 6.0% year-over-year in October, which is up from 5.6% year-over-year growth in September. Generally speaking, consumer credit trends are pro-cyclical, as consumers tend to lever as a reflection of their own personal confidence. However, because most of the growth is being driven by student loans we are not as sure that the confidence argument holds water since student loan debt is arguably less of a reflection of economic confidence than is auto debt or credit card debt. Remember, higher education enrollment rises alongside rising unemployment. 

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - chart2

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - revolving MoM

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - CC debt LT

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - YoY Revolving Credit

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - Installment debt

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - MoM installment debt

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - YoY change in installment debt

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - Revolving   Installment

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - Government Student Loans

 

G19 CONSUMER CREDIT: LOPSIDED LEVERAGING CONTINUES - MoM NSA and SA

 

Joshua Steiner, CFA

 

Robert Belsky

 

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