A resurgence in credit card debt helped push U.S. consumer borrowing in March to the highest level in eight months, the Federal Reserve reported on Thursday (May 7). Total debt increased at nearly a 7.4 percent annual pace in March.
The $20.5 billion increase in total credit – to $3.3 trillion followed a revised $14.8 billion gain in the previous month, according to the data released by the Fed. That increase topped the median forecast of 32 economists surveyed by Bloomberg. Consensus called for a $15.8 billion increase in credit after a previously reported $15.5 billion advance in February. Bloomberg noted that consumers are willing to take on debt as interest rates remain low. And improving job markets, continued stock market rallies and resilient housing markets can lead to increased borrowing.
Indeed, household spending appears to be picking up, growing to a seasonally adjusted 0.4 percent rate in March, according to data released late last month by the Commerce Department. Drilling down to certain subsets of debt in March, revolving debt advanced by $4.4 billion. Non-revolving debt continued to climb during the month, and jumped $16.2 billion after advancing $17.2 billion in February.
There are some early indications that consumer spending may continue its upward trajectory. Visa said Thursday (May 7) that spending continued, albeit modestly, across most categories, according to the company’s Retail Spending Monitor. Retail spending grew 4.5 percent in the month, the company said. The pace quickened from March, as household goods – encompassing electronics and appliances – saw increased demand, up 5.1 percent in April vs. a 1.5 percent gain in March.
“Across the country, we’re seeing consumers continue to spend as their confidence in the economy grows,” said Wayne Best, Visa’s Chief Economist, in a release detailing the company’s findings. “With spending increases over the prior year from retailers and restaurants as well as a more robust travel sector, this broad-based growth is making an important contribution to the economic recovery.”