Consumer borrowing rose by $19.1 billion in July, pushing the total to a record $3.45 trillion, according to the Federal Reserve. The jump indicates the U.S. economy likely is on track to grow at a strong pace through the second half of the year.
The growth in July followed an even larger $27 billion increase in June, the biggest monthly gain in credit since November 2001. The June increase was revised significantly higher from an initial estimate of $20.7 billion.
Non-revolving credit borrowing, the category that includes auto and student loans, rose $14.8 billion, while the category for credit card debt expanded $4.3 billion. Economists believe strong job gains will support increased borrowing and consumer spending, which accounts for nearly 70% of economic activity.The monthly report from the Federal Reserve does not cover home mortgages or other loans secured by real estate such as home equity loans.
The U.S. Department of Labor last week said employers added 173,000 jobs in August and the unemployment rate dropped to a seven-year low of 5.1%.
The economy grew at an annual 3.7% rate in the April-June quarter after turning in an anemic 0.6% increase in the first quarter. Economists believe growth will average about 3% in the third and fourth quarters this year.
Over the past year, consumer borrowing has risen 6.8%, paced by a 7.9% surge in borrowing for auto loans and student loans. The credit card category has risen a more moderate 3.9%.