U.S. Consumer Borrowing Posts Biggest Increase In Six Months

The American people are feeling more confident about spending, if last month’s consumer borrowing numbers are any indicator. Borrowing patterns tend to correlate directly with spending patterns, which is why they’re watched so closely – and economists like what they’re seeing.

The Federal Reserve reported July 10 that consumer borrowing saw its strongest gain since November, rising $18.4 billion in May. That’s on the heels of a weak April, though not as weak as initial reports showed. April’s gains have been revised up from $8.2 billion to $12.9 billion.

May’s gains pushed the monthly borrowing needle to a new high of $3.84 trillion, not including home mortgages and other real estate debts, such as home equity lending.

The borrowing category includes credit card spending, a category that swelled by $7.4 billion in May (compared with a modest $1.2-billion increase in April). Economists believe that this has served as a litmus test for rising consumer confidence in light of strong stock and labor markets.

In contrast, auto sales have been slowing (likely inevitable after last year’s breakneck pace), and the category including auto and student lending has followed suit, increasing at a slightly lower $11.05 billion in May, compared with an $11.8-billion gain in April.

Meanwhile, total U.S. household debt reached a record high of $12.73 trillion in the first quarter, according to a separate report by the Federal Reserve Bank of New York. That’s a $149-billion or 1.2 percent increase from 2016’s Q4. This figure accounts for all lending, including mortgages, and beats the previous record, set during the financial crisis in 2008 at the outset of the Great Recession, by $50 billion.