Total consumer credit increased by $8.20 billion (B), in April down substantially from March’s $19.54B and far below analyst’s expectations. Both revolving and installment credit fell month on month, (m/m). The 3 month moving average (3MMA) total credit was $14.75B.

On a non-seasonally adjusted (NSA), year on year, (y/y) basis, total consumer credit increased by 6.1%. Revolving credit increased by $1.53 B, +6.1% y/y while installment loans expanded by $6.67 B, +5.9%. Despite the slow-down in credit spending in April, consumer confidence remains high. With the expected continued acceleration if the economy, strong balance sheets and increasing financial wealth, consumers are expected to continue to spend and finance said spending at a robust level in the near term. In the longer term the treasury yield curve will shift higher as investors seek a higher return for the increased inflation risk, thus interest rates will rise. This will rein-in credit financed spending.

consumer-credit-fig1Figure 1 shows consumer credit outstanding from 2006 to present. The blue line represents revolving credit, while installment loans, is illustrated by the red line. Consumers have been much more careful with revolving credit since the great recession, the current level remains below the peak achieved in 2008.

Referencing the latest data available from the Federal Reserve, interest rates in February, at commercial banks for automobile loans were 4.52% for a 48 month loan and 4.21% for a 60 month term. Auto loans at finance companies were available at 5.1% in March with an average term of 67 months with an average amount financed of $29,134. Personal loans for 24 months were 10.05%. Credit cards rates were 12.86%.

We expect to see continued strong job creation and consumer spending in 2017. Debt payments as a percentage of disposable income are at record lows leaving room for consumers to take on additional debt.

At Gerdau, we monitor consumer spending because history has shown that increased consumer spending (approximately 69% of GDP), translates into increased steel consumption (and vice versa).