Consumer revolving debt lost some steam in June following a U.S. credit card spring spurt wherein Americans added $14 billion over the prior two-month period. However, the spring credit card bubble mirrors consumer behavior of ten years ago, shortly before the Great Recession.
U.S. revolving credit, mostly credit card debt, edged down by 0.1% or 10 bps (basis points) in June, compared to a revised 8.4% year-on-year (YOY) gain in May and a revised 7.6% YOY increase in April. The monthly gains for April and May were the highest in more than five years.
U.S. Consumer Revolving Credit Analysis
On a quarterly basis, U.S. revolving consumer credit grew 5.3% YOY in the second-quarter (April-Jun), compared to a revised 1.5% YOY gain in the first-quarter, and compared to a revised 3.2% YOY increase for the same period one-year ago, according to the Federal Reserve report.
For April and May, Americans added $14.1 billion in consumer revolving debt (97% credit card debt), with a total increase of $18.0 billion for the first six months of 2019, according to tabulations by CardData.
The sharp increase in April and May reflect the pent-up credit demand created in the first three months of 2019 including bad weather, government shutdown, building trade wars, and uncertainty with the overall direction of the economy along with interest rates, according to analysis by RAM Research.
The recent short-term interest rate cut of 25 basis points, dropping the Prime Rate to 5.25%, will show up in September credit card statements but with little impact on summer spending. The bigger story is the longest running economic recovery in history may have ended and with tariff-fueled price increases in consumer goods looming we may have already entered a recession, suggests Robert McKinley, Senior Analyst for CardTrak, CardFlash and CardData.
Total revolving consumer credit outstandings stood at $1071.5 billion for June, compared to a revised $1071.6 billion for May, and a revised $1064.1 billion for March.
Non-revolving credit increased at an annual rate of 5.8% in June.
Total consumer credit, at the end of June stood at $4120.2 billion, after crossing the $4 trillion milestone in November.
U.S. Consumer Debt Ratios
Financial obligations and debt service ratios are both up six ticks, respectively in the first three months of this year, compared to the same period one-year ago.
The FOR (Financial Obligations Ratio) posted at 15.38% for the first-quarter (1Q/19), compared to 15.35% in the prior quarter, and 15.32% for 1Q/18. The DSR (Debt Service Ratio) reported at 9.91% for 1Q/19, compared to 9.89% for 4Q/18, and 9.85% for the first-quarter of last year, according to seasonally-adjusted figures from the Federal Reserve.
Top 4 U.S. Credit Card Issuers Debt
First-quarter revolving credit card debt, among the Top 4 U.S. issuers, grew 3.4% year-on-year (YOY), compared to 1.5% in the prior quarter. Among the nation’s Top 4 credit card issuers (Chase [JPM], Capital One [COF], Bank of America [BAC], and Citibank [C]), the annual growth rate for U.S. end-of-period (EOP) credit card outstandings in the first-quarter (1Q/19) is the lowest in the past five years.
For the first-quarter U.S. credit card EOP outstandings, among the Top 4 posted at $431.6 billion, compared to $454.1 billion for 4Q/18, and $417.6 billion for 1Q/18. For the first quarter of 2015, the Top 4 reported $348.2 billion in U.S. EOP credit card outstandings.
U.S. Consumer Confidence Outlook
The Conference Board Consumer Confidence Index declined in June, following an increase in May. The Index now stands at 121.5, down from 131.3 in May, its lowest level since September 2017. The Present Situation Index, based on consumers’ assessment of current business and labor market conditions, and the Expectations Index, based on consumers’ short-term outlook for income, business and labor market conditions, declined significantly in June.
The preliminary June Survey of Consumers, by the University of Michigan, reports its Index of Consumer Sentiment (overall) dropped more than 2% from May. The Index of Current Economic Conditions is now down more than 3% from one-year ago and the Index of Consumer Expectations declined more than 5% from June 2018.
After reaching its highest level in 17 years, consumer sentiment among Floridians has been wobbly, at best, this year, dipping in June, then recovering some ground in July. In June the University of Florida Consumer Sentiment Index declined more than 5 points, the biggest drop since May 2015. In July, the Index rose 3.7 points. In June all five components of its Index declined. In July all five components of its Index increased.