Consumer Borrowing Slows to More than Two-Year Low
Recent Federal Reserve data showed that in May, U.S. consumer borrowing slowed to a more than two-year low, which is the first decline in non-revolving credit since the beginning of the pandemic. Total credit rose $7.2 billion, which is not adjusted for inflation, and is the smallest advance since November 2020.
Low unemployment levels and consistent wage increases have given consumers the ability to keep spending, but high prices have caused others to depend on credit cards or dip into their savings accounts to keep up. Spending rose at the start of the year and has stalled largely due to inflation, but delinquency rates are still increasing.
Non-revolving credit, like vehicle purchases and school loans, fell $1.3 billion, which the Fed noted as the first decline since April 2020. Auto industry figures depict that auto sales slowed in May, five-year lending rates for new-vehicle purchases rose to 7.81 percent during the month, which is the highest seen since 2006.
Bloomberg reported that revolving credit outstanding increased $8.5 billion, a slowdown after the sharp increases from the previous two months. Additionally, credit cards issued by commercial banks had a 20.68 percent rate in May, which was a record in Fed data going back to 1972.
Economists predict that households with student debt will continue to be strained, as more than 40 million Americans are set to resume their student loan payments this fall after a three-year break.