Consumer Credit Expands at Steady Pace

Total consumer credit outstanding (all non-mortgage debt) increased by 4.2% ($11.6 billion) over the month in January to $3.33 trillion (seasonally adjusted annualized rate). January consumer credit was revised up from a gain of $14.7 billion to $17.8 billion. Over the 12 months ending in January, total consumer debt was up by 6.9%.

Non-revolving debt is composed primarily of credit for new automobiles and student loans, and makes up nearly three-quarters of non-mortgage consumer debt in the United States. In January, non-revolving debt grew to $2.44 trillion, an increase of 6.3% (or $12.7 billion) over the month. In December, growth in non-revolving debt was initially reported at 4.5%, somewhat below trend, but in the current report, the December growth rate was revised up to 5.8%. On average, this category of consumer debt has expanded by $15.5 billion per month over the last 12 months.

Revolving debt (mainly credit cards) contracted by 1.6% (-$1.1 billion) in January. In December, revolving debt increased at its fastest pace (8.4%) since April of last year. The prevailing pattern of revolving debt since the end of the recession has been a month or two of gains followed by a decline as consumers run up and then pay down their credit cards. Revolving credit tends to be volatile since it is often used for discretionary purchases and more readily impacted by swings in consumer confidence, employment reports and retail prices.

Consumer credit continues to expand at a steady pace and growth is expected to remain solid. Delinquency rates across all types of consumer loan types have continued to decline and remain low relative to the peaks reached in the aftermath of the last recession. Although, there is some concern that given the rapid expansion of student and auto loans, these sectors may be overextended. The ratio of debt-to-disposable income has also been rising steadily and now stands at 25.1%. The long-term average ratio going back to 1995 is 22.9%. 

Source:  FFederal Reserve