MarketWatch is reporting on a Federal Reserve data release related to consumer credit growth, which climbed by 7.7% (seasonally adjusted annual rate) in October 2018. The growth in consumer credit was mostly fueled by credit-card usage which advanced at the fastest clip in 11 months. Furthermore, it is only the third time ever in which revolving credit eclipsed $1 trillion. Student and auto loans (non-revolving credit) grew at a 6.7% rate in the month, which was in line (6.6%) with the previous period.
The MarketWatch article is stated that although “credit-card usage can be perilous, economists generally welcome a rise, as it suggests a desire to spend.” Yes, consumer confidence has remained near decade highs amid a stronger job market, but “sentiment” is a concurrent indicator. Credit-card debt is only about 26% of all consumer debt, having been as much as 38% in 2008. However, we have seen a tremendous increase in both auto and student loan debt, so the 26% isn’t likely the result of leaner personal income statements, but because total debt has grown to greater than $13 trillion (including mortgages).
I don’t know about you, but I am concerned about the growth in mortgage debt, auto and student loans, and credit-card debt, which continue to grow fairly rapidly. At what point does this stop being an engine to economic growth and instead of a major impediment to future economic activity?
All of this debt being accumulated by the “average” American worker has to be impacting their ability to set-aside funds for their retirement through a either a company-sponsored defined contribution plan or a personal IRA.