Consumer credit climbed more than forecast in May, led by the biggest jump in credit card debt in almost five years that may signal Americans are struggling to make ends meet.
The $17.1 billion increase, exceeding the highest estimate of economists surveyed by Bloomberg News and the largest this year, followed a $9.95 billion gain the previous month that was more than previously estimated, the Federal Reserve said July 9 in Washington. Revolving credit, which includes credit card spending, rose by $8 billion, the most since November 2007.
A pickup in borrowing coincides with a slowdown in hiring and declines in consumer confidence that indicate the job market is failing to spur enough gains in wages to cover expenses. Employers added fewer workers to payrolls than forecast in June while the jobless rate stayed at 8.2 percent.
“When the economy’s not doing well, that’s when you want the consumer to spend, and if it means borrowing to do that, then that certainly would be encouraged,” said Millan Mulraine, a senior U.S. strategist at TD Securities in New York, who projected credit would rise by $15 billion.
Stocks Monday fell, giving benchmark indexes the longest slump in more than a month, after a rally in Spanish bond yields above 7% intensified concern about Europe’s crisis. The Standard & Poor’s 500 Index dropped 0.2% to 1,352.46 at the 4 p.m. close in New York. The yield on the benchmark 10-year Treasury note fell to 1.51% from 1.55% late on July 6.
Survey Results
The median forecast of 32 economists surveyed by Bloomberg News called for an $8.5 billion increase in consumer credit. Estimates ranged from gains of $4 billion to $15.6 billion.
Non-revolving debt, including educational loans and loans for motor vehicles and mobile homes, increased by $9.1 billion in May, today’s report showed.
Lending by the federal government, which is mainly for educational loans, climbed by $6.2 billion before adjusting for seasonal variations, as students tried to beat a looming surge in borrowing costs.
President Barack Obama last week 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.
