US consumer debt rises at slower pace on drop in card balances
Tens of millions of Americans currently have student loans, totalling an estimated US$1.6 trillion
[WASHINGTON] US consumer borrowing increased in May at the slowest pace in three months on a pullback in credit card and other revolving debt outstanding.
Total credit outstanding rose US$5.1 billion after a revised US$16.9 billion gain in April, according to Federal Reserve data out Tuesday (Jul 8). The median projection in a Bloomberg survey of economists called for a US$10.5 billion rise.
Credit-card and other revolving debt outstanding declined US$3.5 billion, the first decrease since November. Non-revolving debt, such as loans for vehicle purchases and school tuition, increased US$8.6 billion – a slight deceleration from a month earlier. The report does not include mortgages.
The slowdown in borrowing coincides with a moderation in household spending during the month. A pickup in anxiety about the economy and labour market in recent months may also be encouraging consumers to be more financially prudent and less willing to take on debt.
Fed policymakers have indicated they’ll keep interest rates steady until there’s more progress on taming inflation, which presents another headwind for Americans holding higher balances on credit cards and other loans.
The Fed’s report showed the average rate on credit-card accounts with assessed interest was 22.25 per cent as at May, close to the highest in data back to 1995.
Data issued in May by the New York Fed showed credit-card delinquencies rose in the first quarter to a five-year high due to a pickup in past-due payments on student loans.
Tens of millions of Americans currently have student loans, totalling an estimated US$1.6 trillion. The return of mandatory payments comes as borrowers face higher bills for everyday items after years of elevated inflation, along with the threat of tariffs pushing up prices. BLOOMBERG
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