Con­sumer bor­row­ing rises by largest rate in 6 months

Northwest Arkansas Democrat-Gazette - - BUSINESS & FARM - MARTIN CRUTSINGER THE AS­SO­CI­ATED PRESS

WASH­ING­TON — Amer­i­can con­sumers in­creased their bor­row­ing in May at the fastest pace in six months, re­flect­ing a sharp re­bound in the cat­e­gory that in­cludes credit cards.

The Fed­eral Re­serve re­ported Mon­day that to­tal con­sumer bor­row­ing rose by $18.4 bil­lion in May, the strong­est gain since a $25.1 bil­lion in­crease in Novem­ber. In ad­di­tion, April’s gain of $8.2 bil­lion, the weak­est in­crease in nearly six years, was re­vised up to a more re­spectable in­crease of $12.9 bil­lion.

Con­sumer bor­row­ing is closely watched for sig­nals it can pro­vide about con­sumer spend­ing pat­terns.

With the la­bor mar­ket con­tin­u­ing to churn out jobs and the stock mar­ket at record lev­els, econ­o­mists be­lieve that house­holds will feel more con­fi­dent about in­creas­ing their debt lev­els to sup­port in­creased spend­ing. Con­sumer spend­ing ac­counts for 70 per­cent of eco­nomic ac­tiv­ity.

The strength last month re­flected a greater use of credit cards, which rose by $7.4 bil­lion, much stronger than the $1.2 bil­lion April in­crease. The cat­e­gory 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 this year af­ter last year’s record pace.

The $18.4 bil­lion rise in credit pushed bor­row­ing mea­sured in the monthly re­port to a fresh record of $3.84 tril­lion. The Fed’s monthly credit re­port does not cover home mort­gages or any other debt se­cured by real es­tate such as home eq­uity loans.

A sep­a­rate re­port pre­pared by the Fed­eral Re­serve Bank of New York said to­tal U.S. house­hold debt, cov­er­ing all loans in­clud­ing mort­gages, reached a record high in the first quar­ter of this year, top­ping the pre­vi­ous peak reached in 2008 as the fi­nan­cial cri­sis was plung­ing the coun­try into a re­ces­sion.

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