Americans re-apply for credit cards, take more car loans

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Numbers: Americans pulled out their credit cards in May and borrowed the most money in five years, reflecting growing optimism about the economic recovery and greater consumer willingness to spend.

Total consumer credit rose 10% to $ 35 billion in May, the Federal Reserve said Thursday. This is the biggest increase since March 2016.

Consumer credit has been growing at a slow but steady pace since last fall, but a declining coronavirus pandemic has allowed U.S. states to remove most restrictions. The economy responded by growing faster, with most companies trying to hire more workers. This adds to the optimism.

Economists had expected an increase of $ 18 billion, according to a forecast by the Wall Street Journal.

Big picture: Households tend to use credit more when the economy is good and people feel they have great job security.

At the same time, however, the cost of many goods and services has risen sharply this year due to increased pent-up demand.

The price of used cars, for example, has reached record highs and many popular resorts across the country are booked. These are just a few examples.

Yet credit usage is not much higher than it was a year ago. It only surpassed pre-crisis levels in March. Plus, savings levels are still quite high, in part thanks to the federal stimulus dollars paid out to most Americans.

Last year, the use of credit fell for the first time since the last recession in 2009.

Key details: Revolving credit, like credit cards, increased 11.4%

Non-revolving credit, typically car and student loans, also increased 9.5%. This category of credit is much less volatile. It only declined briefly at the start of the pandemic before returning to steady growth.

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

Market reaction: The Dow Jones Industrial Average DJIA,
-0.75%
and the S&P 500 index fell sharply in Thursday’s trading.


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