Washington, DC, July 8--Consumers increased their debt balances in May, charging more to credit cards and automobile loans, the Federal Reserve said.
Consumer credit outstanding rose $7.3 billion in May on a seasonally adjusted basis to $1.760 trillion, a larger increase than was expected.
The May gain followed a revised $7.9 billion increase in April to $1.752 trillion, originally reported up $10.7 billion. In annual terms, consumer credit grew at a 5% rate in May, down from a revised 5.4% annual growth rate in April, the Fed said.
Ian Morris, an economist with HSBC Securities, noted in a message to clients that many households have also been loading up on home-equity loans and taking cash out of their homes when refinancing mortgages.
Those categories of consumer lending are not included in the Fed report. When taken together with the Fed report, Morris said, consumer-credit growth was especially strong in May.
Low interest rates appear to be increasing household appetite for debt, even though overall debt burdens are high.
In May, for instance, the average interest rate on a car loan was 2.4%, down from 6.6% three years ago. The typical consumer financed 97% of the value of a car with debt, according to the Fed, up from 92% three years ago. The amount financed has increased to $27,920 from $20,923 three years ago.
Separately, the National Association for Business Economics said its members are lukewarm about the prospects for an economic bounce during the second half of the year.
In a survey of more than 100 association members, 88 said they expected the nation's gross domestic product to grow at an annual rate of 3% or less during the second half. Only 28 expected growth of 3% or more.
