MAY 9, 2018
Is the decreasing appetite for consumer credit being driven by tapped out consumers who recognize their inability to afford more, or are those same consumers simply not able to get any more credit as marginal debtors are now suddenly unable to keep up with the debt they already have?
As small-banks see a surge in credit defaults from non-prime borrowers, the latter is likely, and spells big trouble for an economy 70% driven by consumer spending. With very little savings to speak of, that spending must come from debt…debt that increasingly unavailable.
While many celebrated the record high US household wealth in the latest data from The Fed, what most missed was a record $1.0 trillion of credit card/revolving loans, a record $1.3 trillion of auto loans, and a record $1.5 trillion of student loans.
Among these, credit card and auto loans, in particular, have been experiencing accelerating delinquencies, but the very gradual increase in aggregated Net Charge-Offs has allayed any economist concerns about the state of the US consumer. But, a modest scratch below the surface, and a surprising discovery emerges.
While the larger U.S. banks that dominate credit card issuance have focused on prime and super prime consumers post the Great Financial Crisis (GFC), and have enjoyed a prolonged period of low charge off rates concurrent with the Fed’s almost decade long ZIRP (Read more detailed breakdown here.), the charge-off rates among the nation's smaller banks, those outside the Top 100, have seen the charge-off rates soar.
And now, based on this month's consumer credit data from the Fed, which saw an unexpectedly small increase in consumer credit of only $11.5BN, below the $15.2BN expected, and down from $13.6BN last month, it appears this reality is starting to hit home, as March consumer credit rose at the slowest pace since September.
ORIGINAL SOURCE: For The First Time Since August 2008, Credit Card Debt Hits A Plateau by Lance Roberts at Zero Hedge on 5/7/18