Consumer borrowing has picked up again, now reaching a pace not seen in six months. And Americans are piling on debt more with credit cards, versus auto, personal or student loans.
The Federal Reserve reported this week that total consumer borrowing jumped by $18.4 billion in May, the strongest surge since a $25.1 billion increase in November. Moreover, April’s previously reported gain of $8.2 billion, the smallest increase in nearly six years, was revised up to $12.9 billion.
Stronger consumer confidence seems to be a key factor in the borrowing rebound, experts say.
The labor market continues to exceed expectations in jobs created, while the stock market is
still hitting record levels. Consumer spending, both in case or credit transactions, accounts for 70 percent of economic activity.
The borrowing surge last month was mostly due to a greater willingness to use credit cards. Credit card balances jumped by $7.4 billion, much higher than the $1.2 billion April increase. The category of consumer credit that includes auto loans and student loans increased $11.05 billion, slightly lower than April’s $11.8 billion gain.
Auto sales have been slowing down so far this year, following last year’s record pace. The Fed’s consumer credit report does not include mortgages.
In a separate report, the New York Federal Reserve reported earlier that total U.S. household debt, including mortgages, hit a new peak in the first quarter of 2017, rising by $149 billion to $12.73 trillion —$50 billion above the previous peak reached in the third quarter of 2008. Balances climbed in several areas: mortgages, 1.7 percent; auto loans, 0.9 percent; and student loans, 2.6 percent. Credit card balances fell 1.9 percent this quarter.