ARLINGTON, Va.—Two credit union economists are offering insights into what new data on consumer credit and the consumer price index mean, including on when the Fed is likely to act on rates.
Total consumer credit rose 4.6%, at a seasonally adjusted, annualized rate, in October and is up 5.2% compared to a year ago. Revolving credit, primarily credit cards, rose 7.8% during the month and is up 4% compared to October 2020.
“Consumer credit growth slowed somewhat in October but still advanced at a respectable 4.6% annualized pace,” said NAFCU Chief Economist and Vice President of Research Curt Long. “The revolving segment once again outpaced nonrevolving as households restore their credit card balances. Stagnant auto sales are hampering growth in the nonrevolving segment.”
Total consumer credit for credit unions rose 0.4%, on seasonally-adjusted basis, in October, compared to a 0.8% rise for banks and 0.1% rise for financial companies. From a year prior, total consumer credit at credit unions rose 4.6% while banks experienced a 6.6% gain and a financial companies rose 5.4%.
Over the past 12 months, credit unions’ share of the market fell by 0.1 percentage points to 12.1%. Meanwhile, banks’ share increased by 0.5 percentage points to 40.3%, and financial companies' share remained at 13.3%.
“NAFCU expects more sturdy growth in consumer credit over the medium term as households that paid off credit balances during COVID normalize their balance sheets," concluded Long.
CUNA: ‘Inflation Continues to Surge’
Meanwhile, CUNA Senior Economist Dawit Kebede said of findings in the November Consumer Price Index, “Inflation continued to surge in November. Supply chain disruptions, higher demand for goods that continue to exceed pre-pandemic levels and increases in COVID-sensitive items such as shelter contributed to the rise.
“The Federal Reserve was focused on supporting maximum employment as the recent price spike was thought to be transitory due to supply chain issues,” Kebede continued. “Now the Fed seems to be concerned with stabilizing prices since COVID-related disruptions may not ease up soon. There are expectations the Federal Open Market Committee will announce at its meeting next week that it will end asset purchases before June. This will pave the way for possibly of raising the federal funds rate in 2022.”