Consumer Credit Defaults Fall for Fifth Month

Consumer credit defaults fell for a fifth straight month in September, and stood by month’s end at a 2018 low, according to new data from S&P Dow Jones Indices and Experian.

Default rates are an indication of how well the overall economy is doing. When things turn bad in the economy, it almost always shows in higher default rates on various kinds of consumer loans.

However, the current stable-to-dropping level of defaults indicates a strong economy.

The composite rate was five basis points lower than August, at 0.82%. The bank card default rate dropped 38 basis points to 3.14%. The auto loan default rate decreased eight basis points to 0.89%. The first mortgage default rate was down two basis points, to 0.63%.

All five major MSAs recorded decreases in composite default rates in September 2018.

Dallas showed the largest decrease, falling 11 basis points to 0.73%. The default rate for Los Angeles fell nine basis points to 0.56%, while the rate for Chicago fell six basis points to 0.85%. The default rate for New York dropped four basis points to 0.79%, while the default rate for Miami was one basis point lower, at 1.56%.

Notably, all loan types and all major MSAs saw a decrease in default rates in September 2018.

September 2018 also marked the fifth consecutive month of decreasing bank card default rates. The latest rate of 3.14% is the lowest level observed since December 2016. The monthly drop of 38 basis points was the biggest monthly decline seen since December 2015.

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