Amid the lingering questions about when and whether the Fed will raise rates, another data point, or slew of them, came through recently which may auger a further delay in Fed fund hikes.
The Federal Reserve said Tuesday (June 7) that consumers slowed down their pace of borrowing in April, a finding that runs counter to a longstanding trend where they had been borrowing at such a pace that debt levels had been at a record in March.
As noted by the statistical analysis released by the Fed on Tuesday, total borrowings grew by $13.4 billion in April, and that is roughly half of the revised March tally that had come in, as now refigured, to $28.4 billion.
Breaking down the numbers a bit the subsets that include auto loans and student debt were up by $11.8 billion in the latest month, which again pales against the $17.9 billion push that was marked in March. Credit card debt was up by $1.6 billion, positively puny compared to the $10.4 billion in the previous month. And yet: Total consumer debt still stands at a record $3.6 trillion at the end of April.
The conventional wisdom is that consumer spending will remain resilient and will reaccelerate through the summer months on the heels of a continued (relatively) low level of energy and gasoline prices. Still, with consumer credit slowing to a 4.5 percent annual pace, the question remains as to how and when an inflection point may come – to the positive or negative side of the equation for consumer spending. Economic growth, which has slowed to a subpar 80 basis points, has shown that anemia on the slowdown in consumer spending. It could be the case that the consensus among economists, looking for a 2.5 percent GDP growth coming in at the latter half of the year, may need to be taken down a peg or two.