U.S. Consumer Credit Outlook Scott Hoyt, PhD, Senior Director, Research Deniz Tudor, PhD, Director, Credit Analytics February 27, 2019
Speakers Scott Hoyt Senior Director Scott Hoyt is senior director for Moody s Analytics, responsible for the firm s consumer forecasts and analysis. Dr. Hoyt contributes to Economy.com, speaks at conferences, and oversees the production of the U.S. economic forecast. He has done custom modeling for credit and consumer sector clients. Deniz K. Tudor Director Deniz Tudor is a director with Moody s Analytics. Deniz specializes in U.S. consumer credit trends and leads the development of custom and industrybased econometric credit loss models for clients. Deniz is also responsible for product development, management and strategy, including data partnerships that expand the forecast capabilities of Moody s Analytics. U.S. Consumer Credit Outlook 2
Strong Spending Growth Leads Economy Real, % change annual rate 6 5 GDP Consumer spending 4 3 2 1 0-1 14 15 16 17 18 Sources: BEA, Moody s Analytics U.S. Consumer Credit Outlook 3
Retail Sales Growth Slows Retail sales, 3-mo MA, % change yr ago 9 8 7 6 5 4 3 2 1 0-1 Total Ex auto Core 10 11 12 13 14 15 16 17 18 19 Sources: Census Bureau, Moody s Analytics U.S. Consumer Credit Outlook 4
Wages Driving Income Growth Disposable income, $ bil, change yr ago 1,000 800 600 400 200 0-200 -400-600 -800 Govt contribution Other Wages Total 06 07 08 09 10 11 12 13 14 15 16 17 18F19F20F21F22F Sources: BEA, Moody s Analytics U.S. Consumer Credit Outlook 5
Wealth Effect Starting to Fade 280 260 240 220 200 180 160 Median home price, $ ths (L) Wilshire 5000 Dec 31 1980=1.404596 (R) 12 13 14 15 16 17 18 19 32 30 28 26 24 22 20 18 16 14 12 Sources: NAR, SIX Financial Information, Moody s Analytics U.S. Consumer Credit Outlook 6
Saving High but Near Recent Lows Personal savings, % of disposable income, 3-mo MA 11 10 9 8 7 6 5 4 3 2 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 Sources: BEA, Moody s Analytics U.S. Consumer Credit Outlook 7
Household Burdens Near Record Lows % disposable income 13.5 13.0 12.5 12.0 11.5 11.0 10.5 10.0 Debt service (L) Financial obligations (R) 18.5 18.0 17.5 17.0 16.5 16.0 15.5 15.0 9.5 80 83 86 89 92 95 98 01 04 07 10 13 16 14.5 Sources: Federal Reserve, Moody s Analytics U.S. Consumer Credit Outlook 8
Lending Standards Being Tightened Net % tightening 15 10 5 0-5 -10-15 -20-25 Credit card Auto Other non-mortgage 12 13 14 15 16 17 18 19 Sources: Federal Reserve, Moody s Analytics U.S. Consumer Credit Outlook 9
Inflation Recovers Modestly Consumer price indexes, % change yr ago 4 3 2 1 0-1 -2 Total Core 09 10 11 12 13 14 15 16 17 18 19 Sources: BLS, Moody s Analytics U.S. Consumer Credit Outlook 10
Retail Deflation Has Ended, Barely Retail sales deflator, ex auto & gasoline, % change yr ago 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0-0.5-1.0-1.5 93 95 97 99 01 03 05 07 09 11 13 15 17 19 Sources: BEA, Moody s Analytics U.S. Consumer Credit Outlook 11
Trump s Trade War Is a Threat U.S. effective tariff rate, % (gross customs duties/total imports) 30 25 20 15 10 5 Actual Implemented Implemented plus threatened 0 91 01 11 21 31 41 51 61 71 81 91 01 11 Sources: USITC, Moody s Analytics U.S. Consumer Credit Outlook 12
Refunds Support Early-Year Spending Avg tax refunds, $ bil, 2015 to 2018 75 60 45 30 15 0 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Sources: Treasury, Moody s Analytics U.S. Consumer Credit Outlook 13
Confidence Slipped Only Modestly 3-mo MA 120 110 100 90 80 70 60 50 Univ. of Michigan 1966Q1=100 (L) Conference Board, 1985=100 (R) 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 18 Sources: The Conference Board, Univ. of Michigan, Moody s Analytics 150 125 100 75 50 25 U.S. Consumer Credit Outlook 14
Nominal Household Debt Continues to Rise Total balance, $ tril 14 13 $13.07 $120,000 $100,000 12 11 10 9 8 $12.40 Nominal (L) Real 2006$, controlling for inflation (L) Real per household (R) 06 07 08 09 10 11 12 13 14 15 16 17 18 $80,000 $60,000 $40,000 $20,000 $0 Sources: CreditForecast.com, Moody s Analytics U.S. Consumer Credit Outlook 15
Growth to Be Mixed Balances on open accounts, % change yr ago, 6-mo MA 15 10 5 0-5 -10 First mortgage Auto Student 10 11 12 13 14 15 16 17 18 19F 20F Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 16
Across Product Lines Balances on open accounts, % change yr ago, 6-mo MA 15 10 5 0-5 -10-15 -20 Bankcard Heloc Retail Cons fin 10 11 12 13 14 15 16 17 18 19F 20F Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 17
Retail Sales Not Financed by Credit New credit issuance, $ bil 240 200 160 120 80 40 0 HELOC (L) Bankcard (L) CF revolving (L) Retail (L) Retail sales (R) 06 07 08 09 10 11 12 13 14 15 16 17 18 Sources: Equifax, Census Bureau, Moody s Analytics 6,500 6,000 5,500 5,000 4,500 4,000 3,500 U.S. Consumer Credit Outlook 18
Some Products Riskier 90-days delinquent, % of outstanding balance, 12-mo MA 1.5 1.2 0.9 Bankcard (L) Retail card (L) Consumer finance (L) Auto (R) 0.24 0.20 0.16 0.6 0.12 0.3 07 08 09 10 11 12 13 14 15 16 17 18 19 0.08 Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 19
Than Others 90-days delinquent, % of outstanding balance, 12-mo MA 1.1 1.0 0.9 0.8 0.7 0.6 0.5 0.4 0.3 0.2 0.1 0.0 First mortgage (L) HELOC (L) Student loans (R) 07 08 09 10 11 12 13 14 15 16 17 18 19 1.1 1.0 0.9 0.8 0.7 Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 20
Are Auto Loan Borrowers in Trouble? Total number of accounts, $ ths 900 800 Bankruptcy Default 90 DPD 120+ DPD 700 600 500 400 300 200 100 0 06 07 08 09 10 11 12 13 14 15 16 17 18 Sources: CreditForecast.com, Moody s Analytics U.S. Consumer Credit Outlook 21
Auto Delinquency Rates Best in North Total delinquency rates, % of outstanding accounts, 2019M1 1.49 to 2.90 2.91 to 3.56 3.57 to 4.39 4.40 to 8.73 Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 22
Student Loan Performance Is Improving Non-deferred, % of outstanding balances, 3-mo MA 14 12 10 8 6 4 2 0 90+DPD (L) Default (R) 08 09 10 11 12 13 14 15 16 17 18 19 Sources: CreditForecast.com, Moody s Analytics 0.6 0.5 0.4 0.3 0.2 0.1 0 U.S. Consumer Credit Outlook 23
Mortgages Safe Under Fed Scenarios Defaults, % of $ balances, 3-mo MA 0.20 0.15 Fed baseline Fed adverse Fed severely adverse 0.10 0.05 0.00 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22 Sources: Equifax, Moody s Analytics U.S. Consumer Credit Outlook 24
Q&A Additional questions? Send an email to help@economy.com Visit www.creditforecast.com Upcoming Events March 11 - D.C. Executive Roundtable March 18 - Orange County Economic & Credit Outlook Conference April 17 - Boston Economic & Credit Outlook Conference April 23 - Toronto Executive Roundtable April 30 - Columbus Executive Roundtable May 22 - Dallas Economic & Credit Outlook Conference May 28 - US Consumer Credit Outlook Webinar U.S. Consumer Credit Outlook 25
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