U.S. Consumers Increase Borrowing in May
Thu Jul 8
By LEIGH STROPE, Associated Press Writer
WASHINGTON - Americans stepped up their borrowing in May as an improving jobs market and growing economy gave consumers more confidence to take on debt.
The Federal Reserve (news - web sites) said Thursday that consumer credit increased at a seasonally adjusted annual rate of 4.9 percent in May, or by $8.19 billion, from the previous month.
That pushed total consumer credit outstanding to a record $2.03 trillion in May.
The increase in borrowing marked the largest monthly gain since January, when consumer credit jumped by a rate of 15.8 percent, or by $26.14 billion.
April's borrowing was revised higher to a rate increase of 3.1 percent, or $5.26 billion, compared with the 2.3 percent rate increase, or $3.91 billion, reported last month.
The Fed's report includes credit card debt and loans for such commodities as boats, cars and mobile homes. It does not, however, include real estate loans, such as home mortgages or popular home equity loans.
In May, credit card and other revolving credit rose by $1.56 billion, a rate of 2.6 percent. That compared with a decrease of $3.13 billion in April, a 5 percent rate decline.
For nonrevolving credit, which includes loans for cars, vacations and education, demand rose by a rate of 6.2 percent, or $6.61 billion. That compared with a 7.9 percent rate increase in April, or $8.39 billion.
The increased borrowing in May coincided with a string of positive employment reports showing widespread hiring gains.
Consumer spending accounts for two-thirds of all U.S. economic activity. Analysts were anxious for the jobs market to perk up after a lengthy hiring drought, helping to keep the surging economy afloat.
Last week, the Federal Reserve raised short-term interest rates for the first time in four years. The Fed, wanting to keep inflation at bay, raised a key rate to 1.25 percent from 1 percent, which was a 46-year low.
With more rate increases expected, financial analysts are advising consumers with credit card debt and outstanding auto and home equity loans tied to these short-term rates to pay off as much of their debts as possible.
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