The key chart
(Source: FED; CMMP)
The key message
In the face of pressures on real household disposable income, consumers have the option to borrow more, save less and/or consumer less – or various combinations of all three. In terms of borrowing more, monthly flows of consumer credit continue to highlight the relative resilience of US consumers in relation to their UK and euro area (EA) peers. US consumers are doing their “level best” to counter the slowdown narrative (at least so far!).
US consumer credit demand and the slowdown narrative
The US has seen 27 consecutive months of positive monthly consumer credit flows since August 2020 (see key chart above). The latest FED data point for November 2022 (published yesterday, 9 January 2023) showed a monthly flow of $27bn (3m MVA). This was up on the $26bn flow in September 2022 but well below April 2022’s peak of $37bn. The key message here is that while demand for consumer credit is moderating it still remains almost double the average pre-pandemic flow of just under $15bn.
Monthly consumer credit flows also rebounded in the UK and the euro area between October and November 2022 but, in contrast to US trends, their respective flows were only 0.8x and 0.6x their pre-pandemic levels (see chart above). Note that in the EA, flows of consumer credit have still to recover to their pre-pandemic levels.
Conclusion
US consumers repaid less consumer credit in the pandemic period and have borrowed more in the post-pandemic period in relation to their UK and EA peers. While momentum is slowing in each region, the US is the only one where consumer credit remains above, indeed comfortably above, pre-pandemic levels.
US consumers are doing their “level best” to counter the slowdown narrative (at least so far!).
Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.