WASHINGTON (AP) — Americans increased their borrowing in July at nearly double the pace of the previous month, evidence that confident consumers are willing to take on more debt to support their spending.
The Federal Reserve reported on Monday that consumer debt rose by a seasonally adjusted USD16.6 billion in July, up sharply from a gain of USD8.5 billion in June.
The category that includes credit cards rose by USD1.3 billion after shrinking by USD1.2 billion in June. The category that covers auto and student loans surged by USD15.4 billion after an increase of USD9.6 billion in June. It was the largest gain since an increase of USD17.9 billion last November.
Consumer borrowing is closely followed for the clues it can provide about the willingness of consumers to go into debt to support spending.
Consumer spending accounts for 70 per cent of economic activity in the United States. After a slow start this year, consumer activity accelerated sharply this spring. That helped push overall economic growth up to a solid annual rate of 4.2 per cent in the April-June quarter, almost double the 2.2 per cent GDP gain in the first quarter.
President Donald Trump is forecasting even stronger gains in growth going forward but private analysts believe the spring quarter figure was boosted by some temporary factors. Those included a rush to ship US exports of products such as soybeans before retaliatory tariffs were imposed by China and other countries reacting to penalty tariffs levied by the Trump administration.
Many analysts believe growth for the second half of this year will come in at a still solid annual rate of three per cent. If that forecast proves accurate, it would give the country the strongest full-year GDP growth in more than a decade.
The July increase pushed consumer borrowing up to a record of USD3.92 trillion compared to a level of USD3.75 trillion in July 2017.
The Fed’s monthly credit report does not include mortgages or any other loans secured by real estate such as home equity loans.