U.S. consumer credit tops $5 trillion for first time in November

In a surprising turn of events, total consumer credit in the United States soared by $23.7 billion in November, marking a significant increase compared to the previous month’s $5.8 billion uptick, according to the Federal Reserve’s recent report. This surge represents an annual growth rate of 5.7%, a notable jump from the revised 1.4% rise seen in the previous month. Notably, this is the most substantial increase since November 2022, pushing the country’s total consumer credit beyond an unprecedented milestone: $5 trillion.

Breaking down the data further, revolving credit, which encompasses credit card debt, experienced a remarkable surge of 17.7%, following a more modest 2.7% gain in the prior month. This is the most significant increase since March 2022. On the other hand, nonrevolving credit, often associated with auto and student loans, grew at a rate of 1.5% after a 0.9% rise in the previous month. It’s important to note that mortgage loans, the largest category of household debt, are not included in the Federal Reserve’s data.

Economists attribute this sudden uptick in consumer credit growth to the onset of the holiday shopping season. However, when we consider the broader context, we see that consumer credit has been declining due to the Federal Reserve’s aggressive rate hikes and tightening of standards by banks. Now, with expectations that the Fed might start cutting rates, consumers may begin borrowing faster………..[read more]

Rising Dough

How might the recent surge in consumer credit, particularly in revolving credit like credit card debt, impact the broader economy and consumers’ financial well-being? What factors should individuals and businesses consider when navigating this evolving landscape of borrowing and lending, and what role do the Federal Reserve’s policies play in shaping these trends?