NEW YORK—Consumer credit defaults ticked up slightly in October over September, according to a new report.
The analysis also indicated that any small interest rate increase from the Fed will not dampen consumer spending or lead to more defaults.
The S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, shows the composite rate at 0.94% in October, up five basis points from the previous month.
The auto loan default rate was 1.00%, up eight basis points for October. The first mortgage default reported in at 0.81%, up five basis points from the previous month. The bank card default rate was the only rate to decline in October, reporting at 2.75% for the month, a decrease of two basis points, Experian said.
Three of the five major cities saw their default rates increase in the month of October. Miami reported a 1.29% default rate, up 22 basis points from September. New York saw its default rate increase by five basis points to 0.95% for the month. Dallas reported an 0.75% default rate in October, up four basis points. Chicago and Los Angeles both saw their default rates decrease by two basis points for the month, coming in at 1.07% and 0.72%, respectively.
“Despite recent modest increases, consumer credit default rates remain at low levels,” said David Blitzer, managing director and chairman of the Index committee at S&P Dow Jones Indices. “Defaults for bank cards had popped up somewhat in April, but subsequently fell back to the pace seen at the start of this year. At the same time, total bank card, or revolving, credit outstanding as reported by the Federal Reserve has been growing more rapidly in the past few years. The year-over-year growth increased from about 1% in 2012 to almost 5% in the third quarter of 2015. Non-revolving credit is also expanding at a stable 7.5% year-over-year pace in the last three years. Indicators of the consumer economy are mixed. Total vehicle sales were strong with an 18-million-unit annual rate in October, while retail sales showed scant growth at 0.1% per month in October. One positive item is that the University of Michigan consumer sentiment report came in at 93.1 in November compared to 90.0 in October.
“Following the last Employment Situation Report on November 6th showing an increase of 271,000 jobs in October, the consensus for when the Fed will raise interest rates has focused on the FOMC meeting on December 15th and 16th,” continued Blitzer. “Most Fed watchers expect the target range for Fed funds to be raised to 25-50 BP from the current range of 0 to 25 BPS. The probability of a Fed move in December is about 70% based on trading in Fed fund futures at the CME. This long-expected increase is not expected to dampen consumer spending or lead to any near-term move in consumer credit defaults.”