This is an update of our Economic Forecast on Consumer Credit. Our focus in this report is on consumer credit expectations through December 2019.
Historically, consumer credit started 1987 at $653 billion. It is now at a $3,883 billion level, six times higher than before. On average, the 12 month smoothed monthly increase averages near 0.5%,with a median at 0.498%. It has been as high as 1.2% and as low as -0.4% when extreme outlyers are removed. Since January 2018 monthly growth rates have been below average by 0.12 points at 0.38% with April coming in lower at 0.24% gain. The annual average growth rate is 5.98%. The last time growth in concumer credit was above the annual average rate was April 2017.
It is our expectation that year-end 2018 will be approximately $3,926. This creates a 2.4% increase for 2018. This is 3.58 points below the long term average and consistent with current conditions. Monthly growth rates went negative from Summer 2008 until Summer 2010, for almost 2 years after the Mortgage Crisis. Growth remained below average until Fall 2012. They started falling below average again starting in the Spring 2017 until the current time period.
The consumer is a strong stimulant to the U.S. economy and has remained cautious since the Crisis of 2008. Excellent economic conditions regarding unemployment and low inflation are supporting the overall American economy. If the consumer moves into a slightly better optimistic position, the economic recovery in the U.S. could last much longer and also support a global growth environment. For this condition to consistently appear may take another 6 months to a year.
It is our expectation that year-end 2018 will be approximately $3,926. This creates a 2.4% increase for 2018. This is 3.58 points below the long term average and consistent with current conditions. Our expectation for year-end 2019 is estimated to be approximately $4,113 an increase of 4.7%. This is better than 2018, but below the long-term average by 1.28 points. We believe it will be another 12 to 18 months before the consumer’s willingness, or comfort level improves, in order to accept historical average levels of risk.
This is being driven by the consumer still slightly cautious, but with better expectations, but waiting while the fear of new trade conditions are sorted out. This is primarily the balance between the emotions of “trade wars” and the reality of new trade relationships.
We have always said, “The global economy is a much stronger force than any one sitting President, Prime Minister or elected government body, but all will claim or blame, for good or adverse conditions, now, or in the future, depending on the outcome”.
The Consumer Credit default rate update is located at: https://wp.me/p8toqr-162