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Revolving Credit Picks Up November 25, 2014 (0 comments)
San Francisco, CA—Consumers are whipping out the plastic again. According to the most recent report from Wells Fargo Securities Economics Group, consumer credit gained some ground in September vs. a year ago, though it fell slightly short of expectations. Non-revolving credit (such as auto loans and mortgages) made up the bulk of the gains, but revolving credit—i.e. credit cards—is seeing a rebound.
Revolving credit, which can be quite volatile, has been muted since the recession, as consumers focused on paying off debt, not adding to it. But consumers are feeling increasingly confident about the economy, and September’s gain of 3.3% vs. a year ago is the fastest pace of expansion in revolving credit since 2008.
In non-revolving credit, auto loans have seen strong growth the past few years, due in part to extremely low lending rates. Auto lending rates move closely with the Fed Funds rate, and Wells Fargo’s economists anticipate those will rise in 2015 as the Fed does. There may be a short-term spike in auto sales if consumers try to beat the rate increase, but recent surveys show the number of consumers planning to make a major purchase like an automobile has dropped.
Wells Fargo’s economists expect a sound holiday shopping season with revolving credit picking up more as consumers again begin to pay with plastic.