Non-mortgage Consumer Credit Grows at a Slower Pace


The total amount of consumer credit outstanding rose in 2016 as both revolving credit and non-revolving credit rose. The growth in consumer credit is being fueled by non-revolving loans, particularly student loans at the federal government and auto loans held by credit unions. According to the Federal Reserve Board’s Consumer Credit release, the total outstanding amount of consumer credit climbed 6.4 percent in 2016. There is now $3.76 trillion in outstanding consumer credit.

Although consumer credit rose in 2016, its pace of growth was smaller than in 2015. Growth in consumer credit has been decelerating since 2014 as annual increases in non-revolving credit, largely student loans and auto loans, slow. Growth in total consumer credit reached 7.2 percent in 2014 before falling to 7.0 percent in 2015 and 6.4 percent in 2016. At the same time, growth on non-revolving consumer credit reached 8.4 percent in 2014 before falling to 7.7 percent in 2015 and 6.5 percent in 2016.

However, annual growth of revolving credit, largely credit cards, has been accelerating. In 2012, revolving credit grew by 0.5 percent but in 2015 revolving credit increased by 6.1 percent. In the intervening years, revolving credit has recorded successive years of higher growth, 1.4 percent in 2013, 3.9 percent in 2014, and 5.2 percent in 2016.

However, while growth in revolving credit is accelerating while non-revolving credit growth is decelerating, the annual increases in non-revolving consumer credit continue to surpass the expansion in revolving credit. As a result, the share of total consumer credit represented by non-revolving credit has expanded. The figure above shows that non-revolving credit accounted for 71.0 percent of overall consumer credit in 2012 and reached 73.5 percent by 2015. Its share was flat in 2016 as the growth in non-revolving credit was nearly identical to the increase in revolving credit, 6.5 percent and 6.1 percent respectively.

The expansion in non-revolving consumer credit masks compositional changes within this category of consumer credit. The figure above highlights how the share of non-revolving consumer credit held by the federal government, student loans, has increased while the proportion held by finance companies has shrunk. In addition, non-revolving credit holdings by credit unions also expanded, likely reflecting its outsized growth in auto lending, while the share of non-revolving credit held by banks was largely flat over the period.

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