Total consumer credit increased by $13.10 billion, (B) in August, well off analysts’ expectations of $16B. Non-revolving credit moved-up by $7.3B, while revolving credit advanced by $5.8B. Consumer credit increased at a seasonally adjusted annual rate (SAAR), of 4.2%. Revolving credit increased at an annual rate of 7.2% percent, while nonrevolving credit increased at an annual rate of 3.2% percent.

Consumer credit represents loans for households, for financing consumer purchases of goods and services, and for refinancing existing consumer debt. Secured and unsecured loans are included, except those secured with real estate (such as mortgages and home equity loans and lines).The two categories of consumer credit are revolving and nonrevolving debt. Revolving debt covers credit card use for purchases or cash advances, store charge accounts. Nonrevolving includes auto loans, personal and student loans and other miscellaneous items such as recreation vehicle loans.

Revolving credit balances accelerated noticeably in August, coming in at in at $5.8B following an upwardly revised $2.1B increase in July. This was the largest gain since May of this year. Nonrevolving balances reported a weak $7.3B after a strong July, considerably lower than the average in the previous six months.

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 are just now reaching the peak achieved in 2008.

Table 2 consumer-credit-table2presents a table of major holders of debt. It is abbreviated to show the change from 2008 to present. The total outstanding credit was 2,647,105 million in August of 2008. The total for August 2017 was up 41.7% to 3,749,839. The largest increases were for Depository institutions, up 66.5%, Credit Union balances were up 76% and the Federal Government was up almost eight fold.  Two sectors show significantly lower credit outstanding, to include; Nonprofit and educational institutions -57.0% and Pool of securitized assets, down 91.2%

US consumers are willing to borrow as jobs are plentiful, confidence is high. A moderation in income growth has caused consumers to step-up credit buying, previously via auto loans and currently with credit cards. Debt burdens and financial obligations remain near their lowest levels in the 35 years and delinquency and defaults remain low. Saving levels are sufficiently high that consumers could increase their spending and borrowing without undue financial strain.

Risks on the horizon include the uncertainty surrounding healthcare, tax policy and rising geopolitical tensions. These worries may cause business and consumers to restrain or delay large purchases and investments.

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).