EDITOR NOTE: Given skyrocketing asset prices amid a weak labor market (the former is supposed to bolster strength in the other), I’m sure every investor is trying to get a good read on the economic confidence of the masses in the face of a potentially deep crisis. The evidence, showing a huge surge in optimism and consumer confidence, comes in the form of the latest consumer credit numbers (for May)--rising $35.3 billion month over month. The bulk of the borrowing is in auto loans and student loans. Credit card debt may have revealed a modest increase, but it’s an increase nevertheless, whereas previous months fell flat with consecutive declines. Perhaps the latest job figures were enough to boost confidence in bigger-ticket spending, despite those numbers reflecting a huge recovery in mostly low-wage jobs. At any rate, the increased borrowing and spending is what the Fed was counting on as it continues to suppress borrowing costs. It’s also the exact type of market behavior that the government’s stimulus cash was intended to “stimulate.” The growth we may experience as a result may be more “transitory” than the higher levels of inflation it’s about to create.
U.S. consumer credit surged in May by the most on record, reflecting a jump in non-revolving loans that underscores solid household spending.
Total credit climbed $35.3 billion from the prior month after an upwardly revised $20 billion gain in April, Federal Reserve figures showed Thursday. On an annualized basis, borrowing rose 10% in May. Economists in a Bloomberg survey had called for a $18 billion gain.
Non-revolving credit, which includes auto and school loans, increased $26.1 billion, the most on record. Revolving credit, which includes credit cards, rose $9.2 billion after declining in the previous month.
Sales of motor vehicles were robust in both April and May at the same time car prices climbed. The combination has led to increased borrowing. Credit card balances, meanwhile, also rebounded by the most since 2019 as vaccinations and a pickup in social activity spurred spending.
The figures show a greater level of consumer confidence as the economy strengthens along with employment.
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