Consumer credit grows $22.1 billion, or at a 6.7% annual pace
The numbers: Consumer borrowing stayed strong for the second straight month in November, according to the Federal Reserve on Tuesday. Total consumer credit increased $22.1 billion in November to a seasonally adjusted $3.98 trillion. That’s down only slightly from a $25 billion gain in October, which was the fastest pace in 11 months. Economists had been expecting a $19 billion gain in credit, according to Econoday.
This is the third month out of the past four that consumer credit grew more than $20 billion. That hasn’t happened in four years. Consumer credit has been trending around a $15 billion-a-month growth rate.
What happened: Revolving credit, such as credit cards, cooled off a bit in November, rising by 5.5% after a 10.9% gain in October. Nonrevolving credit, typically auto and student loans, picked up, rising 7.1% in November after a 6.5% gain in the prior month. The data does not include mortgage loans.
Big picture: Economists have not been troubled by the gains in consumer credit. Households appear to be in good shape, at least though the fourth quarter. Spending is strong and credit growth remains below gains in personal income. This could all change if the uncertainty over the outlook starts to feed back into job cuts. For now, the rise in consumer borrowing adds to signs of a strong holiday shopping season.
The steady quarter-percentage-point interest-rate increases by the Federal Reserve have not had a big effect to date on lending rates. The latest data from the American Bankers Association showed installment loan- and bank-card delinquencies rose in the third quarter but remain low by historical standards.
What are they saying? “Credit card growth bears watching after a strong holiday shopping season — for now the two-year slowdown in card growth might be ending with the annualized pace stabilizing around 3.5%-4%,” said T.J. Connelly, head of research at Contingent Macro Advisors.
Market reaction: Stocks DJIA, +1.09% were higher across the board Tuesday as investors were optimistic the Federal Reserve will pause raising interest rates and the ongoing U.S.-China trade talks will result in some easing of tensions.