Consumers are managing debt and default rates are favorable for economic expansion.
This is an update of our consumer credit report from earlier this year. It can be found on the Investment Strategy Network site at Menu > Client Service > Economics > USA//Updates > Consumer Credit, if you are not a subscriber and would like to view this document please subscribe here.
Our focus in this report is on consumer credit defaults. Measuring defaults over three major areas: Mortgages, bank cards and auto loans is used to create a composite by S&P/Experian and available on the web site, www.spindices.com. We have found the index useful in determining the financial strength of the consumer which is one of the most important factors in the continuing strength of the American economy.
Currently, the index is portraying a consumer that has debt under control and manageable. Bank credit cards and first mortgage rates improved while auto loan default rate remained unchanged. The composite index is at 0.86 in June which is 0.03 points lower than last month, but 0.04 points higher than this time last year. Mortgage defaults are also slightly higher, year-over-year at 0.63. Auto loans have increased by 0.11 points from last year.
Bank card default rates stopped increasing on a month-to-month basis dropping slightly by 0.12 points, but on a year-over-year basis were up by 0.22 points reaching 3.71 in June.
Overall, the credit default rates are indicating the consumer is managing debt and hopefully will benefit from increased income levels.
The dangers of consumer credit overuse or default still brings about fears of negative market implications because some form of credit has been associated with just about every mark correction in history.
In the full report, revised tables indicating the relationship between specific stocks and this economic indicator are available.
Sample table
