Last month was bad, this month it’s the worst it’s been in almost five years.
Exactly one month ago we showed that after the record debt-fueled spending spree in late 2017, US credit card usage in the first month of 2018 posted a sharp slowdown even as auto and student loan issuance maintained its feverish “drunken sailor” spending pace. Well, fast forward to today, when according to the latest NY Fed consumer credit report, the tapped out US consumer, whose personal savings rate recently hit an all time low, America’s credit card-fueled spending binge just hit a brick wall as total consumer credit was one of the lowest in the past three years.
Of note, with only $148 million in additional credit card borrowings in the month of February, this was the weakest month in revolving credit growth going back almost five years, to November 2013, the last month in which credit card borrowing declined (with the exception of the December 2015 series revision).
Still, even with the nominal increase of just $0.1BN, total revolving credit rose to a new all time high of $1.031 trillion.
The silver lining was to be found in the non-revolving credit data set – used to pay for just two things, autos and “college” – which with the exception of one definition change month, has not gone down since 2011, also hit a new all time high of $2.836 trillion, following the latest monthly increase of $10.6 billion, which however was also a slowdown to recent trends, and the lowest since September 2016.
What about its components? With everything else going for record highs, if at a far slower rate, we doubt it will be a surprise to anyone that both student debt and auto loans hit a new all time high in the quarter ending December 2017, with $1.491 trillion for the former, and $1.12 trillion for the latter (the next monthly update will take place next month, when the Q1 data is released).
Credit and auto loan debt aside, the sharp slowdown, and borderline negative print, in credit card debt is the latest red flag for the US economy, which as a reminder ended 2017 with a record 13-week annualized surge in credit-funded spending.
And now that the hangover from the holiday spending spree is over, and credit card companies demand payment, US consumers – those whose personal saving rate is already near record lows – have not only retrenched, but have substantially slowed down their credit card usage, which for an economy in which 70% of GDP is consumer spending suggests more negative surprises for Q1 GDP.