US Consumer Credit Preview: retail sales in view
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Newly acquired consumer debt is forecast to drop by a quarter in December
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Four of the past six months have surpassed predictions
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Early look at consumer spending in December, with retail sales delayed by the shutdown
The Federal Reserved will release its figures for consumer credit on Thursday February 7th at 3 pm EST, 20:00 GMT
Forecast
Outstanding consumer credit is predicted to increase by $17.0 billion in December, lower than the prior month's gain of $22.1 billion.
Consumer credit and consumption
Consumer credit in the United States is a major subset of overall consumption. Consumer credit, primarily in the form of revolving credit card debt is easy to obtain and many people maintain balances on several cards. It is used to both for ease and to supplement income. Overall retail sales do not differentiate between credit and cash purchases.
Credit extension has been rising since April. The three month moving average has increased from $6.743 billion in April to $18.923 in November. An increase in the last quarter of the year for holiday spending is standard.
Reuters
Revolving and non-revolving credit
The credit figures tracked by the Federal Reserve have two components, revolving and non-revolving debt.
Revolving debt is chiefly credit card debt. It has no fixed payment plan beyond a minimum payment each month to maintain the balance and usually a maximum outstanding limit.
Credit card debt rose $4.8 billion in November following October’s $9.3 billion gain.
Non-revolving debt is a loan with a fixed principal, term and interest. The majority in the Fed’s statistics are college and auto loans.
This category jumped $17.4 billion in November for the largest monthly increase since 2017. Student loans were at $1.564 trillion in November, car loans at $1.141 trillion both records.
Total outstanding consumer borrowing reached $3.979 trillion in November. Credit card debt was at $1.042 trillion in November and structured or non-revolving credit was at 2.937 trillion, both records.
Conclusion
The labor maket is exceptionally strong. Job creation, wages and participation rates are bouyant. It is likely that the realistic optimism of American consumers will be reflected on their December credit cards..
Author
Joseph Trevisani
FXStreet
Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.
