February 7, 2023

Pace of Consumer Borrowing Rose in May

Americans stepped up their borrowing by $19.6 billion in May compared with April, the Federal Reserve said on Monday in its monthly report on consumer credit. That was the biggest jump since a $19.9 billion rise in May 2012.

Total borrowing reached a record $2.84 trillion.

The category that includes credit card use rose $6.6 billion, also the largest gain in a year. Credit card debt reached $847.1 billion, the most since September 2010. Credit card debt remains about 16 percent below its high of $1.02 trillion in July 2008 — just before the financial crisis erupted.

Borrowing for autos and student loans rose $13 billion in May. That was the sharpest increase since February. This category of borrowing has been rising especially fast, driven by loans to pay for college.

The Fed’s consumer credit report does not separate student loans from auto loans. But data from the Federal Reserve Bank of New York shows that student loan debt has been the biggest driver of borrowing since the recession officially ended. In part, that is because some unemployed Americans have returned to school for training in hopes of landing a job.

Despite the increase in credit card debt in May, consumers are not likely to raise their card use to prerecession levels, said Cooper Howes, an economist at Barclays Research. “We expect the trends of student loan-driven expansion,” Mr. Howes said, “and only small changes in revolving credit to continue in coming months.”

The measure of credit card debt in the Fed’s report has risen $15.8 billion this year. That compares with annual increases from $25 billion to $50 billion in credit card debt before the recession, which officially began in December 2007 and ended in June 2009.

Consumers increased their spending from January through March but reduced the pace of their savings to finance it. After-tax income dropped in the first quarter.

Article source: http://www.nytimes.com/2013/07/09/business/economy/pace-of-consumer-borrowing-climbs-a-sign-of-confidence.html?partner=rss&emc=rss

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