Consumer Credit Increased in May by This Number
Today the Federal Reserve Bank issued its report on Consumer Credit for the month of May, and the data indicated that consumers borrowed an additional $5.1 billion through credit lines in the month. An increase of $4 billion was expected. The rise in May marks the eighth straight monthly increase after 20 months of contraction in credit. Credit Card debt also rose in May by $3.4B, adding +5.1% to the annual rate, after falling for four consecutive months.
Yahoo Finance notes, “The increase in credit card borrowing marked only the second monthly gain since August 2008. Households began borrowing less and saving more when unemployment spiked during the Great Recession. Many have resisted pulling out their credit cards in the two years since the downturn ended. Even with the May increase in credit card debt, this category is down 4.4 percent over the past year and 18.5 percent from its peak in August 2008.”
While the data may be a good sign for financials (NYSE:XLF), it could also portend larger problems for an already deeply indebted American consumer base. With housing markets still dead in the water, payrolls not moving any higher, and this morning’s jobs report signaling little to no growth in the labor market, taking on more credit debt may be unwise given the current economic climate.