Consumer borrowing grew in May at the fastest pace in a year and a half, driven by a particularly large increase in revolving credit.

The U.S. Federal Reserve said rose $24.5 billion in May after an increase of $10 billion the previous month. It was the biggest monthly gain since a rise of $24.8 billion in November 2016.

Economists has been expecting a $12.4 billion increase, according to Econoday. The annual growth rate was 7.6%, the fastest pace since November.

The revolving credit category, which largely reflects credit card debt, climbed $16.3 billion in May after increasing by $5 billion in April, while non-revolving credit such as student loans and car loans spiked by $13.6 billion in May following a $9.6 billion increase in the previous month.

Consumer borrowing trends are an indicator of the willingness of consumers to borrow to support their spending. Consumer spending accounts for 70% of U.S. economic activity.

“The overall economy, as measured by the gross domestic product, grew at a lackluster annual rate of 2.2 percent in the January-March quarter,” The Associated Press reported. “But economists are forecasting a sizable rebound in the just-completed April-June quarter, based on reports that consumer spending has picked up again after a winter slowdown.”

Consumer spending is “snapping out of its brief first-quarter funk,” said Michael Feroli, chief U.S. economist at JP Morgan Chase.

The annual growth rates for revolving and nonrevolving credit in May were 11.4% and 6.2%, respectively. Overall borrowing reached a total of $3.90 trillion on a seasonally-adjusted basis.

, , , ,

Leave a Reply

Your email address will not be published. Required fields are marked *