Consumer Credit Grows

The Federal Reserve Board reported that consumer credit outstanding grew by a seasonally adjusted annual rate of 4.1% over the month of June 2016, 1.9 percentage points slower than its growth rate in May. Over the second quarter of 2016, consumer credit outstanding expanded by 5.3%, 0.5 percentage points less than the 5.8% rate of growth in the first quarter of 2016. There is now $3.63 trillion in outstanding consumer credit.

Growth in the outstanding amount of consumer credit over the year partly reflected an expansion in the outstanding amount of non-revolving consumer credit. Non-revolving consumer credit includes both student and auto loans. According to the report, non-revolving credit outstanding grew by 2.1% on a seasonally adjusted annual rate over the month of June, 5.2 percentage points slower than its rate of growth in May. Over the quarter, non-revolving credit outstanding expanded by 5.6%, 0.3 percentage points faster than its first quarter growth rate. There is now $2.67 trillion in non-revolving consumer credit outstanding.

Growth in revolving credit contributed more to the expansion in total consumer credit. Revolving credit is largely composed of credit card debt. Revolving credit outstanding grew by 9.7% on a seasonally adjusted annual rate over the month of June, 7.5 percentage points faster than its pace in May. However, over the quarter, revolving credit outstanding expanded by 5.3%, 0.6 percentage points slower than its rate of growth in the first quarter, 5.9%. There is now $961 billion in revolving credit outstanding.

Presentation1

While consumer credit has been expanding, the distribution in the incidence of consumer credit borrowing varies by income group. Analysis using information from the Federal Reserve Board’s 2015 Survey of Housing and Economic Decision-making (SHED) shown in Figure 1 above finds that households with income below $40,000 account for the majority of credit cards while households with income between $40,000 and $100,000 are more likely to have auto loans. However, there is less dispersion of auto loan incidence across the 3 income categories. To contrast these characteristics, households with income equal to or exceeding $100,000 account for the majority of mortgages.

Presentation2

In the past 12 months, a larger portion of applications for credit cards and auto loans were made by households with income below $40,000 while households with income greater than or equal to $100,000 accounted for an even larger proportion of mortgages.

As illustrated by Figure 2 above, over the last 12 months, the share of households with income less than $40,000 accounted for 47% of credit card applications and 40% of auto loan applications, exceeding its share of holdings overall as shown in Figure 1, 40.1% and 31.7%. In contrast, households with income below $40,000 accounted for 21% of mortgage applications in the past year, a smaller share than its share of mortgages overall.

Households with income between $40,000 and $100,000 accounted for a smaller proportion of applications for credit card debt and auto loans than their share of overall holdings, 29% versus 31% and 31% against 35%. At 30%, these households also accounted for a small portion of mortgage applications in the past year than their share of mortgages overall, 34%.

Conversely, households with income at or above $100,000 accounted for 25% of credit card applications and 30% of auto loan applications over the past 12 months, below its share of holdings overall depicted in Figure 1 above, 29% and 34%. These households also accounted for 50% of mortgage applications over the past year, exceeding its share of mortgages overall.



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