Fed Data Shows Overall Consumer Credit Slows but Revolving Debt Grows

For the U.S. consumer, call it a case of digesting the debt that’s already on the books.

To that end, the Federal Reserve said Monday (July 10) that growth in consumer credit — as measured across the board — slowed to 1.8% in May, as measured at an annual pace. That compares to 5% in April.

And drilling down a bit, nonrevolving debt, tied to auto loans and student loans, fell by 0.4%, where that rate had been in the positive single-digit percentage points in the past few months.

Revolving debt, which typically represented by credit cards, was up 8.2% in the most recent reading, annualized, but that’s a slowdown from the 13.8% growth in the previous month.

In fact, revolving credit had been increasing at double-digit rates in each of 2022’s four quarters. Revolving debt stood at $1.2 trillion at May’s close, per the Fed’s data.

Growth Slows Markedly

The total growth in credit, in dollar terms, wound up being $7.3 billion in May — but consensus estimates had been for a $20 billion increase.

Growth is still growth, but the slowdown we’ve seen in the May data may signal that when earnings season begins in earnest this week, the banks and other lenders may note that they, too, had seen a deceleration into the end of the quarter.

The total revolving debt held by depository institutions was $1.1 trillion in May, up a scant $19 billion month over month.

A deceleration in spending may wind up impacting all manner of firms, but especially the Main Street businesses that drive the economy. As PYMNTS data has found, consumers have been turning to credit to manage their daily financial lives.

And now it turns out, with the data from the Fed pointing the way, that consumers may be getting their arms around the debt they’ve got in place — even if they’re adding to the monthly obligation a bit.

In recent joint research from PYMNTS and Elan, we found that 45% of consumers with credit cards carry a revolving balance.

The data shows that 33% of consumers increased their reliance on credit cards in the last six months and just 15% decreased their card-related spending. High-spending revolvers were the most likely to shift more spending to their cards, as nearly half did so. And 43% of consumers who reported experiencing deeply negative impacts from higher prices ramped up their card spending did so.

Lower-income consumers — those earning less than $50,000 per year — are more likely to consistently revolve their credit card balances. As many as 40% report doing so. A smaller percentage, 24%, of those earning more than $100,000 per year said they’d done the same.

There’s a long way to go before the revolving debt actually declines. But there seems to be some caution in the mix, at least as May shows us — and what lies ahead may be a bumpy path for retailers and other merchants who have depended on consumers loading up their cards to keep top line momentum going.