FFN Quarterly Comment: Non-Revolving Debt Outpaces Revolving Debt in Expanding Economy

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FFN Quarterly Comment: Consumers need to remain vigilant about saving, paying down debt

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When interest rates do eventually increase, and the cost of credit increases along with them, consumers who have learned and implemented important lessons about spending and carrying credit card debt will benefit.

At the midpoint of 2016, an economy that has been holding steady for a year seems to be finally picking up steam with some key indicators, according to the Freedom Financial Network Quarterly Comment on consumer debt and credit issues.

Over the past months, personal income has increased, and revolving debt (primarily credit card debt) has moderated. Instead, most consumer borrowing has focused on non-revolving debt, which includes vehicle loans and educational spending. In May, however, the rate of personal spending outpaced the rate of income growth.

“In general, consumers have been more cautious since the Great Recession,” said Andrew Housser, Freedom Financial Network (FFN) co-founder and CEO. “They have been saving 5 percent of their income and using credit cards a bit more modestly. It is important that consumers continue to exercise these behaviors and make them habits. When interest rates do eventually increase, and the cost of credit increases along with them, consumers who have learned and implemented important lessons about spending and carrying credit card debt will benefit.”

Looking at U.S. employment, fewer people than expected filed for unemployment benefits during the first week of June. However, that number is skewed because 458,000 Americans gave up job searching. In addition, reports in May showed a notable increase in people who are involuntarily employed part-time.

The housing market also is strong, with reports indicating that home sales are 6 percent higher than last year. Yet tightened credit standards made it more difficult for some people to obtain mortgage loans. And borrowers are cautious, sometimes not even attempting to buy a home, after some 6.2 million families lost their homes to foreclosure since 2008.

“While there are indications of an expanding economy across the United States, the economic advantages are tenuous for some people, especially those with credit problems,” said Housser. “People need to remain vigilant about saving – ideally at least 10 percent of their income – and living within their means, even if that means postponing a home, or other major, purchase.”

Freedom Financial Network observes several economic indicators closely and provides consumer education in its work to help consumers get out of debt and stay out of debt.

Recent financial data as reported:

1.    Non-revolving debt grows faster than revolving debt, again. In April (the most recent data available), total outstanding consumer credit rose by 4.5 percent, to a total projected $3.601 trillion, excluding mortgage debt. Outstanding debt has hit a new high each of the past 53 consecutive months. In April, the growth of non-revolving debt (debt for items such as vehicles and education, as well as unsecured installment loans) continued to outpace the growth of revolving debt (primarily credit cards). Non-revolving debt grew by 5.4 percent, while revolving debt increased by a smaller 2.1 percent.

2.    Personal income still on an upward trend, outpaced by spending. In April (the most recent data available), personal income increased for the fourth consecutive quarter, by $69.8 billion, or 0.4 percent. Disposable personal income also increased by 0.5 percent, or $63.5 billion, the same pace as in January. Personal spending increased more, by a full 1.0 percent. Overall wages and salaries increased by $38.6 billion in April.

3.    Personal savings continue to build. In April, consumers saved 5.4 percent of their personal disposable income, down slightly from March’s rate of 5.9 percent.

4.    Unemployment continues to inch down. In May, the U.S. unemployment rate reached 4.7 percent, a decrease of 0.3 percent from the previous month. However, the number of people who were working part-time, but would rather be working full-time, increased by nearly 500,000 in May. Experts had forecast that more people would file for unemployment in early June, but the number instead decreased.

The FFN Quarterly Comment pulls together significant statistical releases and provides quarterly comment on timely debt and credit issues that matter to consumers. To schedule an interview with Andrew Housser, contact Aimee Bennett at 303-843-9840 or aimee(at)faganbusinesscommunications(dot)com.

Freedom Financial Network (http://www.freedomfinancialnetwork.com)
Freedom Financial Network, LLC (FFN), provides comprehensive consumer credit advocacy services. Through the FFN family of companies – Freedom Debt Relief, ConsolidationPlus, FreedomPlus and Bills.com – FFN works as an independent advocate to provide comprehensive financial solutions, including debt consolidation, debt resolution and debt settlement services for consumers struggling with debt. The company, which has resolved more than $4 billion in debt and assisted more than 300,000 clients since 2002, is an accredited member of the American Fair Credit Council, and a platinum member of the International Association of Professional Debt Arbitrators.

Based in San Mateo, California, FFN also operates an office in Tempe, Arizona. The company, with 1,200 employees, was voted one of the best places to work in the San Francisco Bay area in 2008, 2009, 2012, 2013 and 2014, and in the Phoenix area in 2008, 2009, 2010, 2012, 2013, 2014 and 2015. FFN’s founders are recipients of the Northern California Ernst & Young Entrepreneur of the Year Award.

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