After several months of wild swings in US household debt, moments ago the Federal Reserve published the latest data consumer credit data which showed that in September, total debt increased by just $9.1 billion, which while an improvement from last month’s -$15.8 billion, the result of last month’s revision to student loans, was not only a miss to consensus estimates of $9.5 billion, but also a clear slowdown from recent months when the monthly increase was in the $20/$30BN range.
Looking at the composition, both revolving and non-revolving credit were weak.
Starting with the former, in September, credit card debt rose by just $3.1 billion, which with the exception of June’s freak negative revolving credit print, was the lowest monthly increase since the covid crisis.
As for non-revolving credit, or student and auto loans, here too things have gotten bogged down, and after last month’s record ($30BN) contraction driven by student-loan forgiveness, in September just $5.9 billion in total loans were issued, also one of the lowest monthly increases since covid.
Looking at the breakdown in nonrevolving credit we find that while student loans shrank by a record $27.8 billion, to be expected at a time of aggressive vote buying and debt forgiveness by the Biden administration, auto loans actually jumped by $14.2 billion, which while a slowdown from recent quarters was still solid at a time when the rate on the average auto loans is pushing double digits.
Last but not least, the slowdown in debt, and especially credit card debt, is not a surprise since as the Fed also reported today, in September, the average rate on credit cards across US financial institutions just hit a record high of 22.77%.
And with consumers increasingly reluctant to max out their credit cards due to record high rates, at a time when the personal savings rate in the US has collapsed from over 5% to 3.4% – the lowest since 2022 – in just a few months…
… it is now only a matter of time before US GDP prints deep negative now that that pillar supporting 70% of the US economy, consumer purchases, is about to crack.