Next year could be a “transition” year in which consumer deleveraging slows significantly and borrowing improves, spurring credit card market growth.
So contends Christian deRitis, director of consumer credit analytics for Moody’s Analytics. Consumer balance sheets are in much better shape, and banks with low credit card delinquencies are loosening credit standards, he says.
“We are seeing credit growth of plus-700-score bank card holders in some of the toughest economic areas, such as Las Vegas, a sign lending standards are loosening,” deRitis says.
Pent-up demand also will fuel spending growth, deRitis noted during a recent Moody Analytics webinar on consumer credit. “People will not only want to make more purchases, they will need to replace cars, furnaces and other durable goods they have delayed replacing,” he said.
There also will be an increase in the number of households, predicted deRitis, as families that moved together to weather the recession will begin moving back out and will need to buy new household items.
The Moody’s director sees credit cards as the loan product receiving the greatest consumer attention. “People have shifted away from home equity borrowing, for the obvious reasons,” he said.
But consumer confidence, which dipped this summer, remains shaky. A worsening of the economy could quickly prompt consumers to tighten purse strings, altering deRitis’ forecast.
“Better balance sheet and debt ratios indicate consumers have the ability to spend, but then the fundamental question is, do they have the desire to spend more?” he said.
The average U.S. consumer credit card charge-off rate declined again in October as more consumers met their monthly payment-due dates and the delinquency rate on late payments held steady, according to the latest data from Moody’s Investors Service (
