US consumer borrowing unexpectedly declines in broad pullback
Concerns about higher inflation and personal finances have since continued to mount due to US President Donald Trump’s tariffs push
[WASHINGTON] US consumer borrowing unexpectedly declined in February for the first time in three months, reflecting a sharp pullback in credit-card balances and a decrease in motor vehicle and other non-revolving loans.
Total credit fell nearly US$810 million after a revised US$8.9 billion gain in January, according to Federal Reserve data out on Monday (Apr 7). The median projection in a Bloomberg survey of economists called for a US$15 billion rise.
Outstanding credit-card and other revolving debt edged up US$128 million. Non-revolving debt, such as loans for vehicle purchases and school tuition, declined US$938 million, the first drop in nearly a year.
The figures indicate American households were starting to grow more cautious in February about their debt loads. Concerns about higher inflation and personal finances have since continued to mount due to US President Donald Trump’s tariffs push.
Moreover, an abrupt and sharp plunge in the stock market risks causing the most credit-worthy and high-income borrowers to become more guarded in their spending and borrowing. Economists see much greater odds now than they did months ago that the economy will slip into a recession over the coming year in the wake of the Trump administration’s huge tariff rollout last week.
Stress among lower-income households was already starting to build. In January, the share of subprime auto loans at least 60 days past due climbed to 6.56 per cent in January, the most in data back to 1994, according to Fitch Ratings. High car prices and elevated borrowing costs are straining budgets.
In the fourth quarter of last year, the share of consumer debt in some stage of delinquency climbed to an almost five-year high, according to the New York Fed.
Monday’s consumer-credit report showed that still-elevated prices and high borrowing costs are challenging household finances. The average rate on credit card accounts with assessed interest was 21.91 per cent in February, still close to the highest in Fed data back to 1995. The rate charged on car loans rose from late last year. BLOOMBERG
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