Consumer credit climbed more than forecast in May, led by the biggest jump in credit-card debt in almost five years that may signal Americans are struggling to make ends meet.
The $17.1 billion increase, bigger than the highest estimate of economists surveyed by Bloomberg News and the largest this year, followed a $9.95 billion gain the previous month that was more than previously estimated, the Federal Reserve said Monday in Washington. Revolving credit, which includes credit card spending, rose by $8 billion, the most since November 2007.
A pickup in borrowing coincides with a slowdown in hiring and declines in consumer confidence that indicate the job market is failing to spur big enough gains in wages to cover expenses. Employers added fewer workers to payrolls than forecast in June while the jobless rate stayed at 8.2 percent.
“Consumer credit growth appears to be catching up with consumer spending growth, as consumers start to re-lever their balance sheets,” Michael Englund, chief economist at Action Economics LLC in Boulder, Colorado, said in a research note before the report.
The median forecast of 32 economists surveyed by Bloomberg News called for an $8.5 billion increase in consumer credit. Estimates ranged from gains of $4 billion to $15.6 billion.
Non-revolving debt, including educational loans and loans for motor vehicles and mobile homes, increased by $9.1 billion in May, today’s report showed.
Lending by the federal government, which is mainly for educational loans, climbed by $6.2 billion before adjusting for seasonal variations, as students tried to beat a looming surge in borrowing costs.
President Barack Obama last week signed into law a bill providing a one-year extension on student-loan interest rates, in order to avoid a doubling to 6.8 percent that would have taken effect July 1. The rate affects about 7.4 million students, according to the White House.
The consumer credit report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.
The recovery continues to be held back by a soft job market. Payrolls grew by 80,000 workers in June, below the median estimate of 100,000 in a Bloomberg survey of economists and down from this year’s high of 275,000 in January, the Labor Department reported on July 6.
Unemployment held steady at 8.2 percent, marking 41 consecutive months the jobless rate has been stuck above 8 percent. The stretch is the longest of such elevated levels in the post-World War II era.
Consumer spending was little changed in May as incomes rose 0.2 percent, according to Commerce Department data.
Household confidence dropped in June for a fourth consecutive month on mounting concern over jobs and incomes.
Demand for automobiles is one part of the economy that is holding up. Cars and light trucks sold in June at a 14.1 million annual rate, up from May’s 13.7 million pace, according to Ward’s Automotive Group.
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