Consumer Credit Surges by $20.6 Billion in April

Exceeding expectations for the third month in a row, total consumer credit outstanding increased by 7.3% ($20.6 billion) over the month in April to $3.38 trillion (seasonally adjusted annualized rate). March consumer credit was revised upward from a gain of $20.5 billion to $21.3 billion. Over the 12 months ending in April, total non-mortgage consumer debt was up by 6.6%.

Non-revolving debt, composed primarily of credit for new automobiles and student loans, increased by 5.8% in April or by $12 billion. Over the 12 months ending in April, non-revolving debt was up by 7.9%.

Revolving debt, consisting mainly of credit cards, jumped by 11.6% ($8.6 billion) and over the year to April was up by 3.3%. Since November of 2013, the year-over-year growth of revolving debt has run above its 12-month moving average as steady growth in consumer spending has led to increased demand for credit card borrowing. Even so, total credit card debt is still 12.0% below the peak level reached nearly seven years ago.

The huge run-up in non-revolving credit in recent years has raised concerns that borrowing for education and vehicles was becoming overextended, but recent data indicates this trend has moderated.

On the non-revolving side, the spread between interest rates offered on all accounts (average APR) and the APR offered on accounts that have been assessed interest, has increased. Since higher APRs are associated with higher risk borrowers, the increased spread indicates that either the level of debt accrued by higher risk consumers has increased or that credit card lenders have increased the rate on borrowers that are holding a balance. In any case, while higher levels of consumer debt are associated with an increase in consumer spending, continued growth does have risks.

The share of outstanding credit relative to disposable income as risen steadily over the past two years and now stands at 25.3% (the long run average ratio is 22.9%). However, if real disposable income is used, the ratio jumps to 27.5%. 

Source:  http://www.federalreserve.gov/releases/g19/current/default.htm