Consumer credit continues to contract although we saw a bit of improvement this month. Considering the enormous debt strains that remain at the consumer level you could actually argue that the improvement (though marginal) in consumer credit is a net negative for the markets. Consumers need to de-leverage further (via Econoday):
“Consumer credit contracted again, this time by $1.3 billion in June. If there is good news it’s that the level of contraction is less severe than prior months. Also good news is an upward revision to May which now shows a $5.3 billion contraction vs. the initial contraction of $9.1 billion. April’s contraction was a particularly severe $14.9 billion. Simply, the consumer sector is getting hit with weak demand for loans combined with tight bank lending and heavy charge offs.
Nonrevolving credit offers some good news, up $3.2 billion on top of May’s increase of $1.8 (revised from a $6.5 billion contraction). Solid unit vehicle sales in July point to possible gains for this component in the next report. The bad news is in revolving credit which contracted $4.5 billion in June to extend a very long string of contraction. On an annual percentage basis, revolving credit is down 10.5 percent vs. minus 1.4 percent for nonrevolving credit and minus 4.5 percent overall.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.