The latest report from the Federal Reserve Board of Governors on Americans’ borrowing activity, released late this afternoon, showed that total U.S. consumer credit outstanding rose by $12.4 billion in June (lagged release) to $3,855.8 billion. That is an unsurprising pullback following May’s $18.3 billion spike but a much larger slowdown than economists had anticipated. Non-revolving credit, e.g. student and automobile loans, rose by $8.3 billion in June, the 70th monthly increase in a row. Revolving credit, which is mostly consumers’ credit cards, lifted by $4.1 billion in June.
Focusing this month on automobile loans, concerns have risen recently that a bubble is forming in this market. Such worries are understandable considering that the total value of automobile loans now sits just below the recession peak, and the average car loan maturity has jumped from 59.5 months in 2009 to 67.4 months in May of this year. Further, outstanding subprime automobile loan balances have ballooned to an all-time high in 2017, and the rate of new seriously delinquent car loans has now climbed for thirteen quarters in a row. Automobile loans, though, account for only 9.2 percent of Americans’ total household debt and are nowhere near as securitized as the mortgage market was prior to the last financial crisis. Regardless, the car loan market will likely still be worth monitoring going forward.
Sources: Econoday, FRBG, Wells Fargo, FRBSLPost author: Charles Couch