US consumer borrowing accelerated in May as Americans opted for more auto and student loans. These are signs that the American consumer is now comfortable with increased debt. The numbers are there to prove : the Federal Reserve has stated that outstanding consumer credit went up by $18.56 billion, a seasonally adjusted figure, in May from April. The seasonally adjusted yearly rate of growth calculated to be 6.18 percent is higher that the 4.48 percent pace in April. It is, however, slower than the 9.92 percent growth rate in March.
Revolving and non-revolving credit
Non-revolving credit like car and student loans rose by $16.2 billion. There was a slow down of non-revolving credit in April after an increase of 8.7 percent during March. The non-revolving credit payments over the first quarter rose by 6.9 percent. It is a decrease from the 7.7 percent in 2015.
At the same time, revolving credit in May went up by $2.3 billion after an increase of about $1.4 billion per month in earlier times. The revolving credit is described as a particular line of credit which gets renewed automatically once the debts get paid off. The initial three months of 2016 witnessed revolving credit rising moderately after a March spike of 13.2 percent.
Alarm bells clanged in March when the consumer credit went up by $29.7 billion. This figure was a near double of the estimates made by analysts at $16 billion. It is a record hgh post the Federal Reserve tracking of the data. This spending spree was pushed by $11 million spent on the credit card debt in the month. A report published by CardHub stated that debt due to credit cards rose by about $71 billion per year to touch $917.7 billion. The impetus was the final quarter increase of $52 billion. In April, analysts from Standard & Poor or Experian suggested that the US consumers did much better when it came to car and mortgage payments. While the default rates of mortgage went down slightly, the default rates of auto loans remained comparitively low.
As per the Labor Department, the June month saw nonfarm payrolls increasing by 287,000. There was also a growth of wages over the year. If consumer sentiment is taken into account, then the remaining part of the year will be good. The Conference Board thinks so too. The consumer confidence index went up to its maximum since October 2015.