New Fed Data Shows Consumer Credit Usage Hit Record High in May

According to new data released by the Federal Reserve last week, consumer borrowing rose by $22.3 billion between April and May, pushing total outstanding credit to a record high. Despite reaching a new high point, the rate of increase was only 5.9 percent—a decrease from the 9.7 percent increase in April and the 12.7 percent increase in March.

Revolving credit, including credit cards, increased at an 8.1 percent annual rate in May, decreasing from the 19.8 percent it increased in April and the 29.3 percent it increased in March. The 8.1 percent increase is the lowest figure since Q2 2021, when revolving credit usage only increased by 6.7 percent.

According to an article in MarketWatch, the high rates for March and April could be the result of consumers increasing spending in anticipation of federal tax refunds hitting their accounts.

“How much credit households use is seen as a good window into the strength of the economy,” the MarketWatch article reports. “Consumers tend to borrow more when times are good and cut back when the economy is weak.”

The article also notes that while the rising credit utilization rates could mean that the economy is strong and consumers are buying more goods and services, it could also be the result of consumers needing to borrow more because of high inflation and rising interest rates.