Consumer Credit Increases Faster than Expected

Running ahead of expectations, total consumer credit outstanding increased by 7.3% ($20.7 billion) over the month in June to $3.42 trillion (seasonally adjusted, annualized rate). Consumer credit in May was revised slightly upward from a gain of $16.1 billion to $16.6 billion. Over the 12 months ending in June, total non-mortgage consumer debt was up by 6.5%.

Both revolving and non-revolving debt posted gains last month. Non-revolving debt, which is composed mainly of auto and student loans, increased by 7.3% or by $15.2 billion. Over the year ending in June, non-revolving debt was up by 7.7% to $2.5 trillion. A major driver of non-revolving debt, student loans rose sharply during the recession and in the years since, have shown little sign of backing off. Since student loan debt was first included in the consumer credit report back in 2006, they have nearly tripled.

Revolving debt, primarily spending on credit cards rose by 7.4% to $9 billion and was up over the year by 3.5%. In spite of substantial and continuing improvements in the labor markets, consumers are not shopping like they used to. Revolving debt is still 11.3% below peak levels reached before the recession.

On a year-over-year basis, consumer debt growth is slowing but remains healthy. Low interest rates and further gains in employment will help consumer spending and borrowing, but will only go so far while weak wage gains remain a restraint on spending for many households. 

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