S&P Global's Indices Point Out Consumer Credit Defaults Steady

S&P Global Inc SPGI disclosed that data for the period until June current year indicated that consumer credit default was steady with a composite rate of 0.82 percent in June, up one basis point from the previous month of June. According to the company, S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices was a comprehensive measure of changes in consumer credit defaults.

S&P Global said that in June, the first mortgage default rate was reported, i.e. 0.65 percent, which was two basis points higher than May. The company also pointed out that Auto loan defaults recorded a 0.91 percent default rate, which was down one basis point from May. However, the bank card default rate remained same in June, recording a default rate of 3.11% for the second straight month.

The company also indicated that three of the five major cities witnessed their overall default rates increase in June. The company added that Dallas reported a default rate of 0.74 percent, which was higher by five basis points from May. Similarly, Miami's default rate increased for the fourth straight month by four basis points with a default rate of 1.31 percent.

S&P Global stated that Chicago's default rate advanced three basis points from the prior month, reporting a default rate of 1.01 percent. The company added that New York recorded a default rate of 0.83 percent, which was also down six basis points for the month while Los Angeles reported a default rate of 0.67 percent, flat from May.

S&P Dow Jones Indices committee Chairman and MD, David Blitzer, said, "Looking at the economy and credit conditions, American consumers are in good shape. The S&P/Experian Consumer Credit Default Indices covering mortgages and auto loans are within a few basis points of the lowest levels seen in 12 years, while the bank card default index is only 62 basis points above its low."

Blitzer added, "Economic conditions are also favorable with continued low inflation and low interest rates, declining unemployment, a rising stock market and modest economic growth. Consumers recognize the positive environment: consumer confidence is high and retail sales were up in June."

He said that despite the low default rates, as well as, favorable economic factors, some of the factors indicated that the future default rate would increase. He cited that the bank card default rates have increased in the last eleven-month period while consumers continued to apply for more accounts.

Secondly, Blitzer pointed out that personal income growth was weak, only slightly ahead of inflation. He expects inflation to move back to the Fed's two percent target or higher at one point of time and interest rates could even creep up. That meant events could strain consumers unless they gain in accelerated rate of wages.