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Consumer credit growth for February came in considerably better than expected in spite of the economic soft patch this winter.
BW: – The $16.5 billion advance in credit exceeded all estimates in a Bloomberg survey of economists and followed a revised $13.8 billion gain in the previous month, Federal Reserve figures showed today in Washington. The median forecast in the Bloomberg survey called for a $14 billion increase.
It is important to point out however that in order to track the actual private sector consumer credit measures, one must remove the government-sponsored student loans that have been distorting these reports. The non-student-loan consumer credit growth has leveled off recently, rising at around 2.5% per year (as opposed to over 5.5% when student loans are included).
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This spring we will probably see an improvement in this rate, especially as auto loan demand picks up. However with wage growth remaining subdued at just above 2% per year (see chart below), it should not be a surprise that consumer credit growth has leveled off. Households still remain cautious on leverage.
Non-student-loan consumer credit outstanding was growing at a rate that is in the neighborhood of 6% during the years preceding the financial crisis. With wage growth constrained for now, there is little chance we are returning there in the near future.