Consumer Credit Growth Tops Expectations in May

Wells Fargo Research Team Wells Fargo

Consumer credit rose by $18.4 billion in May, the largest increase of the year thus far. April’s soft print was also upwardly revised, but consumer lending continued to gradually decelerate on a year-ago basis.

Consumer Borrowing Rebounds in May

Consumer borrowing jumped by $18.4 billion in May, led by a recovery in revolving credit, which rose by $7.4 billion. This was the largest increase in revolving credit in 2017 and the second biggest since June 2016.
Consumer credit growth has slowed slightly of late. Revolving credit growth has stalled on a year-ago basis, and nonrevolving credit continues to very gradually decelerate.

Interest Rates Drift Higher

This month’s release also contained data on interest rates for various forms of consumer borrowing. On balance, interest rates ticked modestly higher; the interest rate on a 48-month new car loan, for instance, rose 15 bps from Q1 to 4.67 percent in May.
Interest rates have moved higher since May, which could create a headwind at the margin for consumers. A tight labor market and strong consumer confidence should help offset the drag.

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Wells Fargo Research Team

Wells Fargo

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