Continuing a cyclical pattern S&P and Experian analysts have seen for nearly a decade, the auto finance default rate moved higher in October; and actually to the highest level in almost three years.

According to the auto finance component of the monthly report from S&P Dow Jones Indices and Experian, October defaults rose 6 basis points on a sequential basis to land at 1.11 percent; the first time the reading has been that high since January 2014. However, data going back 10 years shows that these reading usually tick up in the fall and typically crest in February or March as income tax refunds flow back into consumers’ hands.

Meanwhile, the composite rate of the S&P/Experian Consumer Credit Default Indices — which represent a comprehensive measure of changes in consumer credit defaults — ticked 2 basis points higher in October compared to the previous month, coming in at 0.90 percent.

The rate for first mortgages and bank cards rose as well, marking the first time since January that those two segment climbed along with the auto finance reading.

The bank card default rate rose 13 basis points to 3.28 percent. The first mortgage default rate increased 1 basis point from September to 0.67 percent.

Rather than auto finance, it’s the bank card reading that has analysts a bit concerned since that is now more than 50 basis points higher than the rate from one year ago. Comparatively, the auto and first mortgage default rates are both within 3 basis points of their levels from one year ago.

The uptick in the national bank card default rate was the first monthly increase since May 2017. All four census divisions recorded a rise in bank card default rates in October.

The Midwest, where the rate increased 17 basis points to 3.20 percent, represented the largest monthly increase. This region was followed by the West, which came in at 3.23 percent, a 15-basis points increase.

The bank card default rate in the Northeast rose 11 basis points from last month to 3.16 percent, while the rate in the South jumped 10 basis points to 3.44 percent.

Looking at October data even deeper, S&P and Experian found that three of the five major cities they track saw their composite default rates rise in the month of October.

Chicago had the largest increase, up 8 basis points to 1.08 percent.

Los Angeles increased 7 basis points to 0.72 percent, while New York came in at 1.00 percent, up 3 basis points from September.

The default rate for Dallas was unchanged at 0.78 percent, while Miami dropped to 1.06 percent, representing a 13 basis point monthly decrease.

David Blitzer, managing director and chairman of the index committee at S&P Dow Jones Indices, reviewed the October data and arrived at these assessments.

“The economy is doing well, with 3% GDP growth in the third quarter, stable inflation, low unemployment and retail sales growing at a 4 percent annual rate. Auto sales jumped in September after drifting lower for most of the summer and then pulled back slightly in October,” Blitzer said. “The data does not suggest any unusual financial stress facing consumers which would explain the small, but across the board, increases in the default rates.

“Looking more closely at consumers, monthly measures of consumer sentiment and expectations remain strong,” he continued. “People are spending: auto sales, retail numbers and discretionary items such as restaurants are all gaining. Total consumer credit outstanding is growing at a 6.6 percent annual rate while revolving credit outstanding is rising at a 7.7 percent annual rate.

“The one concerning item, which might explain the default numbers, is recent softness in real disposable personal income,” Blitzer went on to say. “If a widening spread between income and spending appears, defaults may fill the gap.”

Jointly developed by S&P Indices and Experian, analysts noted the S&P/Experian Consumer Credit Default Indices are published monthly with the intent to accurately track the default experience of consumer balances in four key loan categories: auto, bankcard, first mortgage lien and second mortgage lien.

The indices are calculated based on data extracted from Experian’s consumer credit database. This database is populated with individual consumer loan and payment data submitted by lenders to Experian every month.

Experian’s base of data contributors includes leading banks and mortgage companies and covers approximately $11 trillion in outstanding loans sourced from 11,500 lenders.