U.S. Consumer Credit Trends Remain Healthy

Each quarter, the Federal Reserve Bank of New York releases consumer credit statistics that help provide insights into the credit profile of the U.S. consumer. Given that the domestic economy is driven in large part by consumer spending, these data points are important in assessing the health of the U.S. economy. They also help with our assessment of bank credit quality, as many of the largest financial institutions in the U.S. are levered to the consumer. As a reminder, we have an overweight to financial sector corporate bonds in client portfolios that allow for corporates. What we saw in the first three months of 2016 were generally stable credit conditions. Mortgage delinquencies fell to 3.6%, the lowest rate since 2007. Auto delinquencies held steady at 3%. Consumers increased their borrowing, with overall credit growing by $136 billion to $12.25 trillion. The increase was driven by mortgage debt, which is not surprising given the positive housing market data released in recent weeks. One area to watch moving forward is loans in energy producing regions. As a special breakout this quarter, the NY Fed detailed mortgage and auto delinquencies in energy producing regions. As can be seen in the chart below, both statistics have spiked with the decline in oil and loss of energy sector jobs. We’ll be watching these trends closely to assess any fallout for municipal credit. Overall, the consumer is in good shape and appears primed to continue contributing positively to the U.S. economy.

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Source: NY Fed, WSJ