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Consumer Credit Defaults Steady According to the S&P/Experian Consumer Credit Default Indices

Three of the Five Cities Report Slight Default Rate Increases in June 2016

New York, July 19, 2016 – Data through June 2016, released today by S&P Dow Jones Indices and Experian for the S&P/Experian Consumer Credit Default Indices, a comprehensive measure of changes in consumer credit defaults, shows a composite rate of 0.82% in June, up one basis point from the previous month. The first mortgage default rate reported was 0.65% in June, up two basis points from the prior month. Auto loan defaults recorded a 0.91% default rate, down one basis point from May. The bank card default rate remained unchanged in June, recording a default rate of 3.11% for the second month in a row.

Three of the five major cities saw their overall default rates increase during the month of June. Dallas reported a default rate of 0.74%, up five basis points from May. Miami’s default rate increased for the fourth consecutive month, up four basis points with a default rate of 1.31%. Chicago’s default rate increased three basis points from the prior month, posting a default rate of 1.01%. New York recorded a default rate of 0.83%, down six basis points for the month. Los Angeles reported a default rate of 0.67%, unchanged from May.

“Looking at the economy and credit conditions, American consumers are in good shape” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “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. 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.

“Despite the low default rates and positive economic conditions, some factors hint of future default rate increases. First, the bank card default rates have risen over the last 11 months and consumers continue to apply for additional accounts. Second, personal income growth is weak, only slightly ahead of inflation. At some point, inflation will move back to the Fed’s two percent target or higher and interest rates could even creep up – events that could strain consumers unless gains in wages accelerate.”