“Cracking…Part II”

US consumer credit dynamics weaken further in October 2023

The key chart

Trends in monthly flows of US consumer credit (Source: FRED; CMMP)

The key message

“Cracking – part II”, the update – US consumer credit dynamics weaken further in October 2023.

Quarterly US consumer credit flows in 3Q23 ($4bn) were the weakest since 2Q20, and only a very small fraction of the pre-pandemic average quarterly flow of $45bn.

Monthly flow data for October 2023, released yesterday (7 December 2023) suggests that momentum is weakening further at the start of 4Q23.

The three-month moving average of flows fell to $1.7bn in October 2023, down from $4.4bn in September and $4.6bn in August and down from the recent April 2022 peak of $32.9bn. Perhaps more importantly, the latest flows are only a fraction of the pre-pandemic average flow of $14.8bn.

Trends in monthly flows of US consumer credit (Source: FRED; CMMP)

The strength of consumer credit demand between April 2021 and April 2023 (see charts above) helps to explain the resilience of US consumption in the post-COVID period, especially in relation to trends observed in the euro area and the UK.

Flows peaked in April 2022, however, and since then, the 2Q23 flows were revised down and momentum has continued to slow in 3Q23 and into the final quarter of the year.

In short, the message from the US money sector is one of weaker consumer credit dynamics and elevated risks to US consumption and the growth outlook.

Focus on the flows…

Please note that the summary comments and charts above are abstracts from more detailed analysis that is available separately.