Consumer Finance

Key Takeaways From Fed As Consumer Credit Pace Moderates In June

The Federal Reserve released numbers this week that showed an annual percentage rate increase of 3.1 percent as measured in June, a moderated pace from the previous month when that pace was 7.5 percent.

Takeaway 1: The Credit Pace Slows

The latest tally also showed a slowdown from the 5.1 percent pace that had been seen in all of 2017.

The data released by the Fed shows that total credit was up by $10.2 billion in the month, which, as Bloomberg reported, was below the $15 billion rise that had been estimated by economists. The May data marked a six-month high in consumer borrowing. The seasonally adjusted total number stood at $3.9 trillion.

Drilling down a bit, revolving credit, which covers credit card debt, was off 20 basis points, a sharp slowdown from the torrid 11.2 percent gain in May, which was up from a 1 percent gain in April. The roller-coaster effect of such borrowing can be seen in the fact that, as MarketWatch noted, this is the second drop seen in four months.

Takeaway 2: Uneven Month-to-Month Trends

The consumer use of revolving credit decline stands in stark contrast to non-revolving credit, including student loans and auto loans, which was up 4.4 percent in the month.

The slide in credit card use comes in the wake of news this week, too, that at least some banks had tightened standards on credit card use.

Looking at quarterly data, the revolving loans grew at 4 percent, itself a boost over flat results seen in the first quarter.

Takeaway 3: Tightening Standards

In a report issued by the Fed on Monday, roughly 6.5 percent of banks reported tightening standards on credit loans, while standards for residential and other types of credit remained unchanged from prior periods.

The uneven credit card data comes despite a pace of consumer spending that was on the rise overall, up 4 percent in the second quarter. The savings rate in 2017 stood at 6.7 percent. The Fed’s data shows the revolving loans at the latest tally stood at $1 trillion, $884 billion of which was held by depository institutions.

Takeaway 4: Non-Revolving Loans Gain Ground 

The non-revolving debt shows that $2.9 trillion outstanding shows a slight boost in both student loans and in motor vehicle loans. In the case of the former, lending was up roughly $7 billion in the second quarter, with roughly a $17 billion jump in student loans.

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