US DATA
Consumer credit growth came in a little softer than expected in August, at a seasonally-adjusted +$8.9B, vs an expected +$12.0B. That's a large pullback from $26.6B in July (upwardly revised $1.2B), but still meant that on a year-on-year basis, the growth in total credit outstanding accelerated for a 2nd consecutive month, by 2.3%.
- The gains were entirely driven by nonrevolving credit (+$10.3B), with revolving (-$1.4T) contracting for the 2nd month in 3 for the biggest drop since March 2021. The 2-month increase in nonrevolving credit ($26.3B) was the most since November 2022.
- This report offers another sign that higher short-end rates was negatively impacting growth in some forms of borrowing ahead of the Fed's 50bp cut in September.
- Revolving credit is largely made up of credit cards, for which consumer financing costs are sensitive to short-end rates (consumer credit rates have risen to 23.4% as of August vs 16.2% in early 2022, per Fed data ("assessed interest")). Alongside this has come a rise in credit card delinquencies.
- Non-revolving categories are made up primarily of auto and student loans. While student loan borrowing is policy-senstitive and idiosyncratic, new car 6-month loan rates have risen from 4.5% to 8.4% between early 2022 and August, with a sharp rise in delinquencies as well.
- The August report doesn't have a breakdown of those non-revolving categories (they will be available in September's quarter-end publication), but the $15.5B rise in consumer loans owned by the Federal government (not-seasonally adjusted, though coming off a sharply negative figure a year earlier) suggests that the jump in non-revolving credit may be largely student-loan related and not a sign of reviving auto loans.
- Overall, while total credit outstanding is more or less in line with pre-pandemic trends, that belies a well above-trend revolving credit pile which looks like it has further room to revert over the coming years.
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