US Consumer
It has been key for clients for many weeks to understand that while not alight, consumer activity would still flatten estimates, Q4 (and H1). Most observers badly underestimated their projections, taken in because average income has not kept up with inflation and the home equity bank has folded.
We instead noted that the consumer would remain buoyant (short of $120 crude and, or an E-Z meltdown). That is, the US consumer would neutralize E-Z day-to-day noise as a normal, which is exactly what they did. Finally, appetite in place they would borrow if needed to fuel it. There has been too much fuss made over de-leveraging.
Today we find that Consumer Credit soared in November to $20.4 bln vs expectations of $7bln. Wait for December!
Revolving debt increased by the largest amount in 3 ½ years in November. It is of course true that households have de-leveraged from the peak in June/05 (24.4%, debt vs disposable), just not anywhere near enough to put them into a comma. And they’re done with it. We’re a tad through 21% now, no doubt the trough this cycle.
Look for more ahead from the world’s #1 engine.
Robert Craven
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