(New York, NY) S&P Dow Jones Indices and Experian released today data through June 2018 for the S&P/Experian Consumer Credit Default Indices. The data show:
- The composite rate decreased three basis points from last month to 0.86%.
- The bank card default rate dropped 13 basis points to 3.71%.
- The auto loan default rate was unchanged at 0.93%.
- The first mortgage default rate declined by three basis points, to 0.63%.
The indices represent a comprehensive measure of changes in consumer credit defaults.
Analysis of Five Major Metropolitan Areas
Three of the five major cities recorded decreases in composite default rates in June 2018. Miami showed the largest decrease, falling 47 basis points to 2.30%. The default rate for New York fell four basis points to 0.88%, while the rate for Chicago fell two basis points to 0.86%. Los Angeles and Dallas both showed higher default rates; Los Angeles was three basis points higher in June at 0.65%, and Dallas was four basis points higher at 0.84%.
The Los Angeles metropolitan area does not include Ventura County.
This is the second consecutive month where default rates for all loan types dropped or remained the same; however, each of the rates is still higher than they were 12 months ago. Similarly, the 47 basis point drop for Miami was the largest single-month drop for an MSA since June 2013, yet its default rate still remains elevated compared to levels seen last year.
“The favorable economic conditions consumers enjoyed in the last few years are confirmed by more than the current low levels of consumer credit default rates,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “Unemployment was falling to 4% or lower, inflation barely crept up after touching zero in 2015, and real (inflation adjusted) earnings rose as wages outpaced inflation. The ratio of household debt service to disposable income stayed close to the lowest levels in three decades.
“The Federal Reserve’s reaction to the low unemployment rate was to raise interest rates to deter any increase in inflation. In the last month, the year-over-year rise in the consumer price index moved clearly above 2% and the Fed again raised its benchmark rate, the Fed funds rate, by a quarter percentage point. Oil prices are rising and may push inflation higher. Weekly unemployment claims continue to drop, pointing to a further decline in the unemployment rate. These trends explain why the markets are expecting further rate increases from the Fed. Today’s favorable consumer economy may be slowly shifting towards higher interest and inflation rates.”
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