Consumer Credit Explodes Higher As Credit Card Debt Hits New All Time High

After a sharp slowdown in the growth of US consumer credit in the last month of 2017 and in the first 4 months of 2018, in May, consumer credit exploded higher, soaring from $10.3BN in April to $24.6BN in May, smashing expectations of a $12BN monthly increase.

This was the biggest beat of recently subdued expectations going back all the way to July 2011.

Looking at the components of the spike, some $14.8BN came from non-revolving, or student and auto loans, well above last month's $9.2BN and the highest number going back to November 2017, pushing total non-revolving credit to a record $2.858 trillion ...

... but it was revolving credit that impressed, soaring by $9.8 billion, the biggest monthly increase since November, and one of the highest monthly increases on record.

The sharp monthly jump ended the recent period of skittish credit card spending with a bang, and pushed the total revolving credit to a new all time high of $1.39 trillion.

While there is no immediate explanation for the spike in credit spending by US consumers whose savings rate is already near record lows, it may have to do with greater confidence in the economy and the capital markets. It may also explain the resilience of the US economy in the second quarter which according to high-frequency indicators has now shifted over into Q3.

As usual, the question is whether this burst of credit-card funded optimism is a one-time event, or if US consumers have once again unleashed a debt-fueled spending spree. If the latter, it will likely sustain personal consumption well into the third quarter, however with the obligatory giveback when households receive their surprisingly high credit card statement, which thanks to rising rates, now also happen to carry the highest interest rates since the financial crisis.

Comments

ted41776 Mon, 07/09/2018 - 15:20 Permalink

even if all debt was instantly erased right now, nothing would change since it would get re-created just as quickly. the problem is not debt, the problem is lack of reward for being productive

resistedliving ted41776 Mon, 07/09/2018 - 16:07 Permalink

1982 makes a point ted.  altho i wud fix it from "unproductive" to "criminal" and drop the death stuff.

there are a bunch of millennial's working down the hall from my office.  always working.  night and day

i came in Sunday just to drop off something and there they were.  Marketing for AI robots

or something.  this ole timer was impressed even tho i hv no clue what they're doing

In reply to by ted41776

resistedliving ted41776 Mon, 07/09/2018 - 16:14 Permalink

1982 may have a point ted.  altho i wud change 'unproductive' to 'criminal' and drop the Death stuff

down from my office a bunch of millennials.  work nite and day.  AI marketing for some kind of robots.

i came in Sunday to drop something off...and there they were. 

Not that this ole fart has a clue what they're working on

In reply to by ted41776

Pool Shark HRH of Aquitaine 2.0 Mon, 07/09/2018 - 17:44 Permalink

NEVER, EVER, EVER finance a vehicle (unless the dealer gives you 0% financing with no fees)

If a person can't afford to pay cash for a car, it's too expensive.

There are plenty of good-running junkers on the 2nd-hand market for under $1,000

If a person can't afford to pay cash for a BMW, Mercedes, Acura, Lexass, etc. THEY HAVE NO BUSINESS DRIVING ONE!!!

The ONLY thing you should EVER even think about financing is a primary residence; and never for more than a 15 year term!

[Example: If you buy a $300,000 home with 20% down (borrowing $240,000) at 4.9% interest on a 30-Year Mortgage; you will be paying $218,547 interest over the life of the loan to Banksters!!! YOU ARE PAYING NEARLY DOUBLE THE PRICE OF YOUR HOME... TO BANKSTERS!!!

If you limit the mortgage to a 15-Year term, you will only pay $99,000 in interest; still too much, but you will save nearly $120,000 in interest!!!]

 

STOP FEEDING THE BANKSTERS!!!

In reply to by HRH of Aquitaine 2.0

IDESofMARCH Yukon Cornholius Mon, 07/09/2018 - 17:16 Permalink

Just get more credit cards if the ones you have are filled.

A prospect came in a new shiny and black BMW to buy one of my homes and said he has one of his condos to sell & has an offer for the down payment.  Credit check revealed  he has been buying up homes with different Names in the $5to$700,000 pays full price then easily remortgages them for $50,000 more takes the profit out and lets them falter.  This he's done 6 times so far this year. The BMW was 4months old and has made no payments yet. 

This is the way this broker MR Brown is making his money money. 

In reply to by Yukon Cornholius

MuffDiver69 Mon, 07/09/2018 - 15:24 Permalink

Holy shit...looking at the first graph it almost seems like credit massively spiked in November....was their some big holiday season or something around that time and then people pulled back until May when people go on this thing called vacation I think.......really weird...I think we’re doomed.

Number 9 Ben A Drill Mon, 07/09/2018 - 15:37 Permalink

actually, it is a great way to build your credit, all unsecured btw, and amass some buying power if you see opportunity..

the mail box is filling up with 0% offers again just like the years after 9-11 right up until the train left the tracks..

So.. NOW grab as many cards as you can, establish as much credit, keep a small revolving balance to roll and go to Vegas and put it all on one flop of the dice..

double your money, pay back all the cards and head for the beach..

 

 

In reply to by Ben A Drill

davatankool Mon, 07/09/2018 - 15:25 Permalink

This my most favor data. If 2Qs GDP is mostly contributed by CC spending, what you can expect for next quarter?

 

I think this massive beat will have negative effect on the stocks.

adr Mon, 07/09/2018 - 15:37 Permalink

Well when you can get $2500 from Capital One even with a 485 credit score, why not.

Bank of America raised my credit line to $25k but also increased my interest rate to 28%. I never carried more than a $100 balance on that card. Then they sent me a letter saying that if I didn't make a purchase, they'd close the account.

My Jew score took a slight hit when $25k in available credit disappeared. All well, Chase took up the slack and added $10k to my credit line.

 

It's like they want me to go balls deep. Sorry guys, I know you just want to go shoulder deep in my ass if I were stupid enough to play your game.

everything1 adr Mon, 07/09/2018 - 16:09 Permalink

I have also noticed this, last time I refinanced into a 2.625/15 to get the old mortgage on the right track, I looked at the credit report and said hey what's this?, they said you closed one of your CC accounts, that's not good for your credit score.  Only close one CC account per year or every other if you can!

In reply to by adr

aztrader Mon, 07/09/2018 - 15:40 Permalink

Didn't the price of gas gap up in May?  Either that or they are paying their utilities with their credit cards, because everyone I know in retail are having one of the worst years in history.