US Consumer Credit Grows $20.1 Billion in August, Fastest Pace in Three Months

Consumer borrowing picked up in August, according to the Federal Reserve on Friday. Total US consumer credit grows $20.1 billion in August to a seasonally adjusted $3.94 trillion. That’s an annual growth rate of 6.2%. Economists had been expecting a $15 billion gain, according to Econoday.

Big picture: Credit has been growing strongly, bolstered by solid wage growth. Fed Chairman Jerome Powell said late last month that household balance sheets are in good shape, suggesting they can handle higher short-term interest rates. Consumer credit card delinquencies remain low, according to the latest data from the American Bankers Association. Economists expect consumer spending to add to economic growth in the third quarter, but probably not as strong as the 3.8% annual rate seen in the second quarter.

What happened: Revolving credit, like credit cards, rose 5.6% in August after two sluggish months. Non revolving credit, typically auto and student loans, rose 6.4% in August, the same pace as July. The data does not include mortgage debt.

Market reaction: Consumer credit rarely moves markets. Stocks were down sharply on jitters caused by this week’s sharp bond market selloff. The Dow Jones Industrial Average DJIA, -0.68% was down nearly 300 points at one point in the afternoon before staging a comeback. Fed officials attributed the rise in bond yields to a stronger economic outlook seen in the recent data.

PepsiCo stock falls to extend weekly slide after analyst downgrade

Shares of PepsiCo Inc. fell 1% in premarket trade Friday, extending losses seen since the beverage and snack company reported results earlier this week, after Macquarie Research downgraded the company, saying revenue growth is becoming more expensive. Analyst Caroline Levy cut her rating to neutral from outperform, and slashed her stock price target to $107, which is just 0.4% above Thursday’s stock closing price, from $122. Although the Pepsi and Frito Lay parent reported early Tuesday fiscal third-quarter sales that rose above expectations, Levy noted margin fell on more brand spending, currency-driven increases in input costs abroad and higher freight costs. “Organic sales growth will require more investment,” Levy wrote in a note to clients, and “we believe these pressures will remain a drag on margins.” The stock has shed 4.6% amid a four-session losing streak, including a 3.7% decline the past three sessions despite the earnings and sales beat. Meanwhile, the SPDR Consumer Staples Select Sector ETF has slipped 0.8% the past four sessions and the S&P 500 has eased 0.4%.

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