The Federal Reserve recently reported that 2018 ended with a notable increase in available consumer credit.
Statistics released by the Fed indicated that consumer credit increased by a seasonally adjusted annual rate of 6.5 percent in the fourth quarter and 5 percent in December. Total outstanding credit experienced a $16.5 billion boost during the month to $4.01 trillion.
Revolving credit, largely a reflection of credit card debt, rose at an annual rate of 2 percent to $1.04 trillion, following a 5.6 percent increase in November, whereas non-revolving credit increase at a 6 percent annual rate ($14.9 billion) to $2.97 trillion.
The Fed’s statistics revealed that federal government holdings of student loans continue to be the largest portion of non-revolving credit, comprising 41.7 percent of outstanding credit.
Depository institutions and finance companies are secondary and tertiary holders, with 24.9 percent and 17.2 percent, respectively, of outstanding non-revolving credit.
Some financial analysts have predicted that consumer credit growth with continue throughout much of 2019.
“The consumer credit market has been buoyed by relatively strong macroeconomic factors this year, and our forecast sees more of the same in 2019,” TransUnion Vice President of Research and Consulting Matt Komos said in a December press release. “Consumer demand for both personal loans and auto loans is expected to remain high, and lenders are expected to continue looking to expand their books of business by providing more subprime and near prime borrowers with loans. This is a positive for both lenders and consumers.”
Komos also noted that delinquency rates remained at either low or “normal” levels, and that lenders seemed to have “the confidence to open up their portfolios to slightly more risk.”
“From a consumer perspective, subprime and near-prime borrowers accessing new credit will now have even more opportunity to showcase that they can responsibly manage their payments,” he added. “We anticipate the trend of managing risk exposure through loan amount and line management strategies for these higher risk consumers will continue into 2019.”
The recent increase in consumer credit comes following a stretch during which some analysts noted a tightening of credit and/or sluggish growth, leading to some declines in application rates, as noted by the Federal Reserve Bank of New York in its October 2018 SCE Credit Access Survey.