WASHINGTON–Total U.S. consumer credit growth slowed to a $5.1 billion gain in May, down from a $16.9 billion rise in the prior month, according to Ary Paglairizes, a spokesperson for the Federal Reserve.
That translates to a 1.2% annual rate in May, down from a 4% rise in the prior month.
The increase was much smaller than expected, with economists forecasting a $10 billion gain in May consumer credit, according to a Wall Street Journal survey, MSN.com reported.
Among the data points in the Fed numbers:
- Revolving credit, such as credit cards, fell at a 3.2% rate in May after a 6.9% gain in the prior month. It is the first drop since November.
- Nonrevolving credit, typically vehicle and student loans, rose 2.8%, following a 3% rise in the previous month. This category of credit is typically much less volatile.
The ‘Big Picture’
The Fed data does not include mortgage loans, which is the largest category of household debt, MSN stated.
“Big picture: The small increase in credit usage fits with a picture of weaker consumer spending this year,” MSN reported. “Retail sales fell 0.9% in May, the biggest drop in two years. Car sales spiked earlier this year as consumers sought to avoid higher prices from planned tariffs. But sales have slowed sharply since April.”
The report added that a gradually slowing labor market, concerns about high prices and elevated borrowing rates have made consumers less eager to spend, economists at Nationwide said in a note to clients.