Consumer credit posts third consecutive month of modest gains in April, led by auto loans

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Numbers: Consumer borrowing recorded a third consecutive modest monthly increase in April, according to Federal Reserve data released Monday.

Total consumer credit rose $ 18.6 billion in April. That’s an annual growth rate of 5.3%. Consumer credit is growing at a slow but steady pace, increasing $ 18.2 billion in February and $ 18.6 billion in March.

Economists had expected a gain of $ 20 billion, according to a forecast by the Wall Street Journal. Credit in March was revised down from earlier estimates of a gain of $ 26 billion.

What happened: Globally, consumer credit is on the rise due to the strong trend in student loans and the growth in auto loans.

Revolving credit, like credit cards, fell 2.4% in April after gaining 1.7% the month before.

Non-revolving credit, typically car and student loans, rose 7.6% after gaining 6.4% in March. This category of credit is much less volatile. It only declined briefly at the start of the pandemic before resuming steady growth.

The Fed’s report does not include mortgages, which are the largest category of household debt.

Big picture: For the economy to prosper, as some economists expect, retail sales will need to remain strong.

James Sweeney, chief economist at Credit Suisse, believes retail sales are on the verge of falling. “The goods consumption overrun was the predictable result of an extreme fiscal stimulus, social distancing and a real estate boom,” he said in a note to clients over the weekend.

But Jonathan Silver, founder and CEO of Affinity Solutions, a global data company that collects debit and credit card transactions, disagrees, saying Americans keep spending. “Our data tells us people are spending money,” Silver said in an interview on entertainment, travel and other categories of spending due to the pandemic.

What are they saying? Overall, consumers’ balance sheets have improved markedly since the pandemic (at the aggregate level) as they spent just under a third of the stimulus and used the balance equally to pay down debt and increase l ‘savings,’ said TJ Connelly, chief research officer at Continent Macro.

Market reaction: Stocks were down on Monday, with the Dow Jones Industrial Average DJIA,
-0.09%
down 150 points and the S&P 500 SPX index,
+ 0.02%
down five points.

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