Consumer credit moved higher in February

April 5, 2024

Consumer credit rose at a seasonally adjusted annual rate of 2.4% in February after a downward revision in January. Total credit outstanding rose $14.1 billion, just under expectations. The three-month moving average for credit outstanding fell to $11.7 billion from $12.9 billion in January, below the 2010s average of $13.5 billion. The three-month moving average peaked in July 2021 at $67.5 billion. That was when consumers were utilizing credit to hedge against higher inflation. Consumer credit outstanding has grown 2.5% year-over-year.

The series for consumer credit does not adjust for inflation. When controlling for the hot inflation data in February, consumer credit outstanding fell by 0.1%. Revolving debt, which includes credit cards, rose 0.5% in real terms, while nonrevolving debt, which includes car loans, student loans and personal loans, fell 0.3%.

The bulk of the increase in outstanding debt came from the revolving side. Revolving debt rose by $11.2 billion in February and 10.2% on a seasonally adjusted annualized rate. Revolving debt has hit an all-time high. This is not necessarily cause for concern for consumers. While credit card delinquencies have risen in recent quarters, most of that stress has been among low-income and young borrowers. The rise has only just breached the low levels seen in 2019 and is nowhere near the levels of stress observed during the financial crisis. According to the Federal Reserve, much of the increases observed among subprime borrowers have been due to higher credit scores achieved during the pandemic, when student loans were in forbearance and households used stimulus to pay down debt. Those higher scores allowed for greater credit availability.

Nonrevolving debt rose by $2.9 billion, at a 0.9% seasonally adjusted annual rate. Higher rates have kept many from purchasing vehicles, which is included in this category, even as auto makers sweeten deals.

Higher rates have led to the observed slowdown in the usage of credit. The February data includes information on interest rates for car loans, credit cards and personal loans. In February, 60-month car loan rates were up to 8.22% from 8.15% in the fourth quarter, credit card plans were up to 21.6% from 21.5% and personal loans were up to 12.5% from 12.4%. That is a slowdown in the increases but still makes purchases more expensive. In 2019, those rates were 5.0%, 14.7% and 9.5% respectively.