Credit to Americans Still Declining (V, MA)

Unemployment may be improving or getting less bad, but the same is not true for credit and borrowing by consumers if the June trends continue.   The consumer credit report for June has just come out, and there was another decline and revision lower for May.  Outstanding credit fell by an annualized rate of 4.9% to right at $2.503 trillion.  The Federal Reserve data shows that consumers are still holding pat and  continue to deleverage their own finances.

After looking at various estimates from Bloomberg and Dow Jones, we were looking for nearly a $4 billion decline in this report.  But the $10.3 billion drop in credit was much wider than expected and the reading from May was adjusted down to a drop of $5.4 billion from the preliminary figure of a drop of $3.2 billion.

If we read through the data history, this is the worst credit trend since the early 1990’s.  Revolving credit (credit card use) fell by almost 7% or $5.3 billion in June to $917.0 billion.  That also marker a record 10th consecutive drop.  Revolving credit was down another $4.9 billion in May.

Non-revolving credit measuring automobile and mobile homes and other issues fell by almost 4% or $5.0 billion to $1.586 trillion.  That same figure was a drop of 0.4% or $506 million in May.

Visa Inc. (NYSE: V) is still up 0.6% at $69.09, but it did weaken a tad after the 3:00 report. Shares of MasterCard Incorporated (NYSE: MA) are up 1.5% at $204.60, but the stock was above $205.00 before this.

The takeaway here is that this may be a moot point.  The jobs data this morning and other data this week is from July retail sales and more and we are now in August.  With this being a June report, traders are effectively under the mindset that this might just be noise.

JON C. OGG