Consumer Credit Growth Slows in October, Falling Short of Forecasts

According to the Federal Reserve, total consumer credit saw a rise of $5.2 billion in October, marking a decrease from the $12.2 billion gain in the previous month. This translates to a credit growth rate of 1.2% annually, down from the 3% rate in the prior month.

Economists had anticipated a gain of $9.1 billion in consumer credit for October, as reported by the Wall Street Journal forecast.

Key Data

Revolving credit, which includes credit cards, experienced a slowdown with a growth rate of 2.7% in October, following a growth rate of 4.1% in the previous month.

Nonrevolving credit, primarily consisting of auto and student loans, increased at a rate of 0.7% after a rate of 2.5% in the prior month. This category of credit tends to be less volatile. It is important to note that the Fed’s data does not encompass mortgage loans, which constitutes the largest segment of household debt.

The Big Picture

Michael Pearce, U.S. economist at Oxford Economics, suggests that credit growth is being affected by stricter standards and higher interest rates.

While there has been concern regarding the recent surge in credit card usage, Pearce points out that the proportion of credit card debt relative to household incomes is lower than it was before the pandemic, reassuring clients in a note.

What Experts are Saying

Ian Shepherdson, chief economist at Pantheon Macroeconomics, predicts that the downward trend in consumer credit will likely continue over the next few months due to higher interest rates diminishing people’s willingness to accumulate additional debt.

Market Reaction

During afternoon trading, stocks (DJIA SPX) demonstrated an upward trajectory, while the 10-year Treasury yield (BX:TMUBMUSD10Y) increased to 4.14%.

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