Non-Mortgage Credit Growth Continues

The Federal Reserve Board reported that consumer credit outstanding continues to grow. However, at a seasonally adjusted annual rate of 5.2 percent over the month of October 2016, growth in consumer credit was 1.9 percentage points slower than its rate, 7.1 percent, in September. There is now $3.73 trillion in outstanding consumer credit.

Revolving credit has also contributed to the over consumer credit growth, but to a lesser degree. Revolving credit is largely composed of credit cards. In October, revolving credit climbed 2.9 percent, about half the growth of non-revolving credit. There is now $981 billion in revolving credit outstanding.

The chart above shows that the post-recession expansion in consumer credit reflects strong growth in non-revolving consumer credit*. Both auto and student loans, as illustrated by the figure below, have contributed to growth in non-revolving consumer credit. Although, auto loans, which exceeded student loans until the beginning of 2009, continue to remain a smaller debt category than student loans. In October, non-revolving credit grew by 6.0 percent. There is now $2.75 trillion in outstanding non-revolving consumer credit.

However, there are indications that the consumers’ ability to service non-revolving debt has worsened. An earlier post showed that the proportion of student loan debt outstanding that is 90 or more days past due has been growing consistently since at least 2003. The share 90 or more days past due remains especially elevated in recent years though the upward trend has abated.

Similarly, consumers’ ability to service auto loans also poses some concern. The share of auto loans 90 or more days delinquent followed a similar cycle as mortgages, credit cards, and HELOCs, peaking in response to the recession and then beginning to decline. However, in recent years the share of auto loans 90 or more days past due has also flattened. Analysis by the NY Fed found that the flow of auto loans into the 90 or more days past due category has generally stagnated for most households with a credit score above 620. However, for subprime borrowers, those with a credit score below 620, the flow of auto loans into “serious” delinquency has begun to rise noticeably.

* The 2010 spike in non-revolving consumer credit, also reflected in the overall consumer credit trend, represents a shift of consumer credit from pools of securitized assets to other categories largely due to financial institutions’ implementation of the FAS 166/167 accounting rules. An earlier post provides a more in-depth discussion of these rules.

 



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