NEW YORK—Consumer credit defaults showed a slight decrease May, according to a new report. But at the same time all other credit categories showed a slight decline, bank cards ticked up slightly last month.
The latest S&P/Experian Consumer Credit Default Indices, a measure of changes in consumer credit defaults, shows a composite rate of 0.81% in May, down five basis points from the previous month. First mortgage defaults reported a 0.63% default rate for May, down six basis points from the prior month. Auto loan defaults recorded a 0.92% default rate, down five basis points from April. The bank card default rate increased two basis points in May, recording a default rate of 3.11%.
Four of the five major cities saw their overall default rates decrease during the month of May. New York recorded a default rate of 0.89%, down 12 basis points for the month. Dallas reported a default rate of 0.69%, down seven basis points from April. Chicago’s default rate decreased five basis points from the prior month, posting a default rate of 0.98%. Los Angeles reported a default rate of 0.67%, down four basis points for May. Miami’s default rate increased for the third consecutive month, up six basis points with a default rate of 1.27%.
“Overall the consumers’ credit picture is very good,” said David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “Consumer credit default rates continue at the lowest levels in more than 10 years and well below those seen before the financial crisis. These positive developments are supported by continued gains in the economy: an unemployment rate under 5%, combined with increases in incomes and wages and stable prices. Debt service ratios remain close to record lows, while outstanding consumer credit and mortgage debt have risen modestly this year.”
Blitzer said one area worth following is the default rate on bank cards.
“Between December 2015 and May 2016 (this report) the default rate on bank cards rose from 2.5% to 3.1%; it is up in the last three months, while the default rates on the other sectors followed here are down,” Blitzer explained. “The current level of bank card defaults is quite low; however the upward trend stands out compared to the other data series.”