Growth in Consumer Credit Use Slows as Balances Continue to Decline

Recent data released by the Federal Reserve show that as the COVID-19 pandemic has continued its trend of limited consumer purchases and declining credit card balances, U.S. consumer credit growth has slowed more than economists anticipated. A Bloomberg survey of economists predicted a median increase in credit usage of $15.5 billion in October, but total credit only increased $7.2 billion throughout the month.

According to American Banker, revolving credit decreased for the seventh time in the past eight months, declining to $979.6 billion, the lowest since May 2017. Without additional government financial aid, American consumers have been limiting their spending.

This quarter has brought record numbers of COVID-19 infections, causing a tightening of governmental restrictions on certain activities. Job growth also appears to be easing, which could result in even further constrictions of spending and borrowing by individuals and households.

The Fed’s report shows that retail sales slowed down during October after the strongest-ever quarterly pace of spending as Americans limited their purchases, leading to a $5.5 billion decline in overall credit card debt.

Alternatively, nonrevolving debt, which includes school and auto loans, increased by $12.7 billion, the highest growth in three months. Federal government lending, primarily student loans, rose by $4.5 billion before seasonal adjustment. Total consumer credit for October rose an annualized 2.1 percent, following a 4.4 percent growth pace in September.

Click here to view the Federal Reserve report.