Consumer Borrowing in U.S. Increases, Led by Credit Cards
Consumer borrowing in the U.S. rose in May for the eighth straight month, led by a boost in credit card use and student loans.
Credit increased by $5.08 billion after a revised $5.67 billion gain in April, the Federal Reserve said in Washington today. Economists projected a $4 billion increase, according to the median forecast in a Bloomberg News survey.
Consumers may be ramping up credit-card debt as gasoline prices and unemployment climbed. At the same time, high fuel costs are probably keeping households from spending on big- ticket items like autos.
“Even though we’re moving higher, we still have a long way to go,” said Brian Jones, an economist at Societe Generale in New York. “People that do have jobs are perhaps feeling a little bit more secure in them and they feel a little bit more comfortable about taking on debt.”
The median forecast was based on a survey of 37 economists. Estimates ranged from an increase of $6.5 billion to a decrease of $3 billion.
Revolving debt, which includes credit cards, rose by $3.37 in May after decreasing $877 million in April, according to the central bank’s data. It was the first gain this year and the biggest since June 2008.
School Loans
Non-revolving debt, including educational loans and loans for autos and mobile homes, climbed $1.71 billion for the month after increasing by $6.54 billion in April. The figure included a $5.5 billion boost in federal government lending for education before seasonal adjustment. The Fed’s report doesn’t track debt secured by real estate, such as home equity lines of credit.
Unemployment climbed to 9.2 percent in June as the U.S. economy added 18,000 jobs, Labor Department figures showed today. Slow employment gains are likely dimming Americans’ outlooks, making households hesitant to spend.
Stocks dropped on concern the slowdown in employment will hurt economic growth. The Standard & Poor’s 500 Index fell 0.9 percent to 1,340.74 at 3:10 p.m. in New York. Treasury securities rose, sending the yield on the benchmark 10-year note down to 3.01 percent from 3.14 late yesterday.
Consumer spending, which accounts for about 70 percent of economic activity, unexpectedly stagnated in May, Commerce Department figures showed on June 27, as high fuel and food prices kept consumers from opening their wallets.
Auto Sales
Americans also curbed spending on autos. High retail gasoline prices and lingering supply chain disruptions from the March earthquake and tsunami in Japan drove auto demand down to 11.4 million in June, its slowest pace in 12 months. General Motors Co. (GM) and Ford Motor Co. (F) reported on July 1 that the auto- makers’ U.S. sales rose 10 percent in June, missing analysts’ estimates.
The elevated gas prices earlier in the year weighed on consumer confidence, David Nelms, chief executive officer of Discover Financial Inc., said in an interview with Bloomberg News on June 24. The Riverwoods, Illinois-based credit-card company is relying on an uptick in new U.S. consumers borrowing from Discover rather than waiting for existing customers to borrow more, Nelms said in the interview.
“Many of our customers have deleveraged and paid down some of their debt over the last couple of years since the financial crisis,” he said.
To contact the reporter on this story: Jillian Berman in Washington jberman13@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net
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