Overall consumer borrowing rose by $17.1 billion in May from April, the Federal Reserve reported Monday.
The gain drove total borrowing to a seasonally adjusted $2.57 trillion, nearly matching the all-time high reached in July 2008. While borrowing has increased steadily the past two years, most of the gains have been driven by auto and student loans, which rose to a record level of $1.7 trillion in May.
Revolving credit, which is primarily credit card spending, jumped by $8 billion in May, the most since November 2007. Still, the level of revolving credit increased to only $870 billion, or 2.2% above the post-recession low hit in April 2011. The category had totaled more than $1 trillion before and shortly after the recession began.
Consumers cut back sharply on credit card debt during the recession and immediately thereafter. Only in the past year have they started to put more on their credit cards, although the gains have mostly been modest.
Non-revolving debt, including student loans and loans for motor vehicles and mobile homes, increased by $9.1 billion in May, the Federal Reserve's report showed.
The overall economy grew at a lackluster pace of 1.9% in the January-March quarter. Many economists believe growth slowed even further in the April-June quarter. Unless job growth picks up, consumer spending could weaken and drag on economic growth.
Some economists believe the economy could get a boost in the second half from lower gas prices, which have been dropping sharply since April.
The economy created an average of just 75,000 jobs a month from April through June, down from an average of 225,000 jobs a month in the first quarter. Consumer confidence fell in June for the fourth straight month, according to the Conference Board. The group’s index is closely watched because consumer spending accounts for 70% of economic activity.
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. But it can also mean that more people are having trouble finding jobs and deciding to go back to school. Student loan debt has been rising sharply.
Last week, President Obama signed into law a bill providing a one-year extension on student-loan interest rates, in order to avoid a doubling to 6.8% that would have taken effect July 1. The rate affects about 7.4 million students, according to the White House.
The Federal Reserve’s report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.
