Americans’ borrowing activity improved in August, according to a new report from the Federal Reserve Board of Governors. Specifically, total consumer credit outstanding rose by $20.1 billion in August (lagged release) to $3,935.4 billion. That was the largest gain since May and much better than anticipated. However, most of the increase was due to non-revolving credit (student and automobile loans), which rose by $15.2 billion in August, with some additional help likely coming from the fall academic term beginning at many universities.
Revolving credit (consumers’ credit cards), on the other hand, lifted by only $4.8 billion in August. Although that was the largest gain since May, year-over-year growth fell to just 4.4 percent in August, the smallest annual increase recorded since November 2016. Further, revolving credit utilization might have picked up in August but retail sales during this same period still largely disappointed analysts’ forecasts. Add to that the recent decline in Americans’ rate of saving and it should not be too surprising why many economists believe that elevated consumer spending will only be sustainable going forward if wage growth accelerates.
Sources: Econoday, FRBG
Post author: Charles Couch