Quarterly Consumer Loan Charge-Off Rate Prediction

This is our 22nd consecutive post predicting the Federal Reserve’s quarterly consumer loan charge off rate.

The Federal Reserve Bank will soon report the Consumer Loan Charge-off Rate (CLCOR) for the fourth quarter of 2021. According to the data published on Nov 22^nd 2021, the total seasonally adjusted CLCOR figure for the 2021Q3 was 0.89% continuing the downward trend of its previous quarter. The only time that CLCOR was reported lower than the 2021Q3 figure was 1985Q1 at 0.79% which is also the first figure reported by The Federal Reserve Bank in that series. However, when we look at the charge-off rates by category, the Charge-off Rate on Credit Card Loans reported its lowest level ever in 2021Q3 at 1.67% (the most recent published number).

Here is a LINK to the graph above.

The current most recent prediction for the upcoming report for 2021Q4 is 1.30%. However, since the onset of the pandemic, and its related shutdowns, there has been a systematic break in the series. As such, the predictive model is trying to catch up and it is usually behind the actual levels by two quarters. The smaller number of observations for the post-pandemic period accounts for this lag. Thus, we believe that the 2021Q4 rate should be lower than 1.30%. The overall trend for the next four quarters still looks downward. However, we might see a slight increase versus the last reported figure, 0.89%, as the delinquency rates increased from 2021Q2 to 2021Q3, and that effect is usually reflected in the CLCOR by a lag of one quarter.

Here are the predictions for the next four coming quarters: