The slowdown in retail sales growth has been a big surprise this spring, as lower gasoline pump prices were expected to boost spending. What’s going on?
Analysts at TIS Group have a fascinating if scary answer: The consumer credit cycle is breaking down as families sense the economy is slipping a gear and don’t want to over-leverage themselves. This is happening even as corporate credit continues to boom.
It’s the old story, right? If you don’t need credit, you can get it — and if you do need it, you can’t.
This distinction is important because the world is not on a typical boom-and-bust business cycle. With central banks driving much of the action, the world is instead on a credit cycle, which according to TIS means that everything depends on the availability and price of credit.
With the Fed threatening to raise rates despite a disinflationary environment, credit conditions are changing in the United States as well as in other developed countries.
The chart above, provided by TIS, shows that according to Federal Reserve data, Consumer Credit Revolving fell