05) Economic Indicators: Consumer Credit Report

by · October 16, 2010

What It Is

The Consumer Credit Report (CCR) is issued by the Federal Reserve Board. It is released monthly, around five weeks after the end of the month, and covering the previous month. It informs the public of the estimated changes in dollars of consumer outstanding loans. Two types of credit are covered in the CCR: revolving and non-revolving. Revolving credit can be increased by the individual to a particular limit without any assistance from the creditor, as in the case of credit cards.  Non-revolving credit has a fixed loan period, as in auto loans. The report does not include home equity lines of credit (HELOCs) or any real estate–backed loans.

Basic Information

Though the general categories of data are either revolving or non-revolving, these two are further subdivided into seven categories. These are the following:

  • Commercial banks
  • Finance companies
  • Credit unions
  • Federal government & Sallie Mae
  • Savings institutions
  • Non-financial businesses
  • Securitized asset pools

In addition to these categories, the report also shows the average interest rates for various consumer debts, such as auto loans and credit cards. It also reports the credit standing of the average consumer as well as the types of loans that experience the most growth.

This information is derived from credit sources, or those that extend credit or loans to consumers directly or indirectly. These are banks, private lending companies, and retail stores. The data is presented along with the results of the last three months as well as recent revisions, if any.

How the Report Is Valuable

The CCR is complementary to Retail Sales and Personal Consumption. Collectively, this information can be used to identify possible spending habits of consumers relative to certain types of interest rates, such as the prime rate and the fed funds rate.

It is recognized by the Conference Board and belongs to the Index of Lagging Indicators, which means its effect can also be associated with other changes in the overall economic activity (lagging indicator). In theory, consumers do not increase their borrowing unless they are able to obtain an increase in their personal income to compensate with the debt. Borrowing thus tends to be highest when the economy is picking up, not when it’s going down.

There are a few other highlights in the report. Among these are consumer debt, which can be adjusted seasonally and written in trillions, present yearly run rate, and the percentage of delinquencies in credit cards. If there is an increase in delinquency, it’s possible that consumers are taking on more debt than they can handle. Experts have created a benchmark to monitor the debt levels, and if the present default level is already approaching the benchmark, there may be a recession coming up. Of course, that conclusion should be in relation to other economic factors.

You can also find auto loans breakdown and comparisons up to the last five years.

Things to Watch Out For

There are some important data that are not covered in the report, such as the decline or growth of consumer payments, rise and fall of loan growth, and home-equity debts. It can also be very volatile because of the seasons. It’s also possible that investors and analysts would study short-term trends than longer-term ones spanning several periods.

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