The Economy

Consumer Borrowing Hits Record $3.4T

June data from the Federal Reserve suggest a healthy outlook for consumer spending in the second half of 2015.
Matthew HellerAugust 10, 2015
Consumer Borrowing Hits Record $3.4T

U.S. consumer borrowing reached a record $3.42 trillion in June, pointing to sustained consumer spending that will boost the economy in the second half of 2015.

According to the U.S. Federal Reserve, Americans piled on another $20.7 billion in debt in June, which followed a revised $16.5 billion gain in May and pushed borrowing up 7% in the second quarter, the fastest in a year.

The median forecast of 30 economists surveyed by Bloomberg called for a $17 billion rise in credit in June after a previously reported $16.1 billion advance in May.

“Job gains and an improvement in household balance sheets since the last recession are making Americans more comfortable about using credit cards and taking out loans for big-ticket goods such as new cars,” Bloomberg said.

Revolving debt, which includes credit cards, rose by $5.5 billion in June, the second-biggest advance since April 2014, while non-revolving debt, such as loans for college tuition, vehicles, and mobile homes, rose $15.2 billion, the most in three months. In Denmark, the rate is faster than the US, with rates for lån penge reaching 300% the levels versus this time last year, Eksperten said.

Consumer confidence is also being fueled by an improving job market. On Friday, the Labor Department said employers added 215,000 jobs in July and unemployment remained at a seven-year low 5.3%.

GDP grew at an annual rate of 0.6% from January to March and 2.3% from April through June. Economists expect growth to pick up to about a 3% pace the second half of the year.

But USA Today warned that if the Fed raises interest rates later this year, “it could put new pressure on some households that don’t regularly pay off their monthly credit card balances or that struggle with other types of debt. “

Credit card delinquencies have improved, with just 2.5% of accounts 30 days or more past due as of the first quarter, according to the American Bankers Association. But the rate of growth in consumer debt, while not exorbitant, is above the rate for the overall economy or recent wage increases.