Issuers in the US should be pleased by the latest consumer figures from the US Federal Reserve: the annualised monthly growth rate for revolving credit rose by just over eight percent in May, beating the previous high in the year to date, April's 7.9 percent gain. Since there had been a decline in March, the news will be a relief for lenders, while the authorities see no cause for alarm about possible overleveraging. Why? The growth in debt has come in the main from consumers with good credit scores, says the Fed: this is not a subprime bubble in the making. "However, when the next recession inevitably hits, default rates will surely increase", commented Patrick Houlihan of Verisk Financial Research. "Of much greater concern is the rather opaque shadow banking industry, where much of the risk from the pre-Financial Crisis era now resides. More conventionally,... Read more >
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