The unexpected growth of consumer loans in the United States increased by $25.5 billion, marking the largest increase since the end of 2022
Consumer borrowing in the United States increased by $25.5 billion in July, marking the largest increase since November 2022. Federal Reserve data shows that outstanding credit, including revolving and non-revolving debt, has significantly risen, with credit card debt increasing by $10.6 billion and non-revolving credit such as auto loans surging by $14.8 billion. While the growth in borrowing is driving retail sales up, high interest rates and credit card balances may pose risks to future spending. The proportion of newly delinquent auto and credit card loans has reached a new high since 2010, indicating an increase in consumer credit risk
According to Zhitong Finance, in July, US consumer borrowing saw the largest increase since November 2022, reflecting a significant growth in non-revolving debt and credit card balances. Data released by the Federal Reserve on Monday showed that outstanding consumer credit increased by $25.5 billion, surpassing all economists' expectations. Non-revolving debt, including auto loans and student loans, surged by $14.8 billion over a year. These figures are not adjusted for inflation.
The increase in borrowing helped drive the largest increase in retail sales since early 2023, including a rise in motor vehicle purchases. However, if consumers become more cautious, carrying larger credit card balances and high-interest loans could pose risks to spending. While Fed policymakers are expected to take the first step in lowering benchmark interest rates next week, it will take time for their actions to lower consumers' financing costs.
A report released last month by the New York Fed showed that although the overall consumer debt delinquency rate remained at 3.2% in the second quarter, the proportion of new delinquencies on auto and credit card loans continued to rise. The proportion of auto loans delinquent by at least 30 days is the highest since 2010. The proportion of new delinquent credit card debt has risen to 9.05%, the highest level in 12 years