Consumer credit growth accelerates sharply in May

Consumer borrowing increases $24.6 billion, double economists’ forecast and the fastest pace in six months

Getty Images A shopper walking in the Union Square district in San Francisco.

The numbers: Consumer borrowing picked up in May, according to the Federal Reserve on Monday. Total consumer credit increased $24.6 billion in May to a seasonally adjusted $3.9 trillion. That’s an annual growth rate of 7.6%, which is the fastest pace of credit growth since November. Economists has been expecting a $12.4 billion gain, according to Econoday. Credit grew a revised $10.3 billion in April, up from the prior estimate of $9.3 billion.

What happened: Revolving credit, like credit cards, surged in May, rising by 11.4% after a 1.3% gain in April. This is the biggest increase since November. Meanwhile, nonrevolving credit, typically auto and student loans, rose 6.3% in May, up from 3.9% in the prior month. The data does not include mortgages.

Big picture: Much of the acceleration in economic growth in April-June quarter is due to consumer spending “snapping out of its brief first quarter funk,” said Michael Feroli, chief U.S. economist at JP Morgan Chase. And now it looks like consumers are using their credit cards to fuel that spending.