Consumer credit default data for August showed small increases in numerous default rates, according to the S&P/Experian Consumer Credit Default Indices released Tuesday.

The composite rate was 0.96% in August, up four basis points from the previous month. The first mortgage default rate and the auto loan default rate also increased four basis points to 0.84% and 0.90%, respectively. The bank card default rate was the only rate to report a decrease in August at 2.71%, down eight basis points from the previous month.

Four of the five major cities saw their default rates rise in August. New York saw the largest increase, reporting 1.04%, up 12 basis points from July. Dallas saw its default rate increase by seven basis points to 0.71% in August. Chicago reported its third consecutive increase with a 1.21% rate, up six basis points from the previous month. Miami reported a default rate of 1.46%, up one basis point for the month. Los Angeles was down 13 basis points to 0.76%, the only city to report a decrease in August.

"The ongoing improvement in the consumer economy is reflected in consumer credit default rates," says David M. Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. "In recent months, we have seen substantial job growth, increases in consumer spending and a rise in consumer credit outstanding. Despite continued weak wage growth, consumer credit default rates remain in a narrow range at low pre-financial crisis levels. Two economic areas showing strength are auto sales and housing. Car and light truck sales saw recent gains reaching an annual rate of about 17.5 million units as sales of new homes and housing starts picked up. To reflect that the growth in credit is largely due to loosening of credit standards indicating banks are willing to bear increased risk by approving more sub-prime consumers, which will lead the higher default rates."

Blitzer added that with the Federal Reserve policy meeting set for Wednesday and Thursday, analysts continue to debate the possible impact of an interest rate increase.

"Presumably, the Fed will raise interest rates, the question is whether it will be now, late this year or sometime in the first half of 2016. Little initial impact is expected on consumer use of credit or on default rates. A quarter-point increase in the Fed funds rate will not affect fixed rate mortgage loans or auto financing. Some small increases in interest rates on bank cards and similar lending may occur in the months following Fed action. Adjustable rate mortgages tied to market rates will rise as mortgage loans reach dates when rates reset. Barring a pattern of rapid sustained interest rate increases from the Fed, which no one foresees, the near-term impact on consumer defaults will be very small. Immediate results of a Fed move will be seen in the stock and financial markets."

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