The Federal Reserve will soon publish its official report for consumer charge- off rates for Q1 2017.

In anticipation of that report and in keeping with our practice of the past two years, this post offers Recovery Decision Science’s predictions for each quarter of 2017.

As a reference, RDS uses a proprietary Error Correction Model (ECM) to predict trends in the charge-off rates. Based on our model, here are our quarterly predictions for the year ahead:


Importantly, charge-off rates for the past two years have been in decline and, in fact, were at historic lows for much of 2015 and 2016. But as you can see from the table above, we are beginning to see a steady increase throughout the remainder of this year. According to our ECM model, overall charge-off rates will increase 2.3% from 2016 to 2017.

We believe this upward trend is really just a correction back to more typical charge-off rates that hover in the 3% range. Below is a historical profile of charge-off rates dating back to the start of the Great Recession in 2008.



In our next post, we will compare the above predictions to the actual first quarter charge-off rates reported by the Federal Reserve.