U.S. consumer borrowing rose less than expected in April, as Americans cut back on the use of revolving credit.
The Federal Reserve reported Thursday that total credit rose by $6.5 billion in April, the smallest gain in six months, but the eighth straight monthly increase. Borrowing in March was revised downwards to $12.4 billion from $21.4 billion originally estimated. Economists had forecast that consumer borrowing rose by $10.5 billion in April, according to a survey by FactSet.
Non-revolving credit, which includes student loans and loans for motor vehicles and mobile homes, advanced by $10 billion in April, the largest rise in three months. On the other hand, revolving debt, which includes credit cards, fell by $3.4 billion as a cooling labor market dampened household confidence and consumer borrowing.
The March increase was driven by a surge in student and auto loans. In March, total borrowing rose to a seasonally adjusted $2.54 trillion, slightly below the all-time high of $2.58 trillion reached in July 2008, eight months after the Great Recession began.
After hitting that peak, consumers cut back sharply on borrowing for the next two years, and slowly began taking on more debt again in the fall of 2010. More borrowing is generally viewed as a healthy sign for the economy. It suggests consumers are gaining confidence and growing more comfortable taking on debt. The concern is whether that confidence will continue now that hiring gains have slowed.
In May, the nation added just 69,000 jobs, the weakest showing in a year and the third straight month of lackluster job gains. Another reason for the increased borrowing has been people having trouble finding jobs and deciding to go back to school. Student loan debt has been rising sharply.
The overall economy grew at an annual rate of 1.9% in the January-March quarter. While that reflected a sharp slowdown from 3% growth in the October-December quarter, consumer activity picked up during the first three months of the year, growing at the fastest pace since late 2010. Consumer spending accounts for 70% of economic activity.
The Federal Reserve's G.19 borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.
