US DATA: Consumer Credit Potentially Turning From Headwind To Tailwind

Consumer credit grew more quickly than anticipated in October, rising by $19.2B ($9B more than expected) from a downwardly revised $3.2B in September. The rise in revolving (eg credit cards) credit was particularly impressive at 13.9% annualized ($15.7B of the total), the fastest growth since 2022, with non-revolving (eg auto loans and student loans)up 1.1% ($3.5B).

• The impressive resilience in consumption has been driven more by incomes and fiscal transfers than consumer credit growth, but after a weak stretch of growth through most of 2024, consumer credit actually looks to be stabilizing and perhaps even picking up slightly.
• This could be a result of the Fed starting to cut rates including by 50bp in September, but overall it looks like the positive impulse to growth from consumer credit is becoming increasingly positive after being a drag through most of the past 2 years as short-end rates rose.
• Although delinquencies have been rising per most Fed data, key leading indicators including the latest Senior Loan Officer Survey have seen a loosening in standards and stronger demand for consumer loans since early 2023. And with strong economic growth, credit as a % of GDP has remained steady at around 17% over the past 3 years, and is below the 18.7% level seen just before the pandemic.
• Overall there are no recessionary signs in the credit data - and there is an argument that it's turning into a tailwind instead of a headwind for growth, particularly if the Fed continues to cut rates.