U.S. Consumer Borrowing Growth Slows to 3-Year Low
Feb 15th, 2017 @ 1:39 PM by Amber Nelson
Even though American consumers continued to spend more money in December than they did in November, the increase was much lower than expected and the slowest pace since 2013.
According to figures from the Federal Reserve, consumer debt increased by $14.2 billion in December 2016 from the month before. That is significantly below the $20 billion jump predicted by most economists.
Meanwhile, November’s consumer borrowing number was revised upward to $25.2 billion, from $24.5 bill
The main cause for slowing borrowing in December seems to be a pull-back in credit card spending. Revolving debt, which includes credit cards and other short-term borrowing, rose $2.4 billion during the last month of the year, a huge fall from the $11.8 billion increase in November. Even still, credit card use grew 6.1 percent in all of 2016, up from a 5.2 percent gain in 2015 and reaching the highest rate since 2007.
Non-revolving debt, which includes car loans and student loan debt, climbed $11.8 billion in December, after rising $13.4 billion in November. For all of 2016, non-revolving credit increased by 6.5 percent, down from 2015’s 7.7 percent growth rate, marking the slowest pace since 2011.
Economists expect consumer borrowing to ramp up in the coming months if the economy continues to expend as predicted. That growth is predicated on the unemployment rate remaining low and consumer confidence continuing to grow.
The U.S. economy grew by just 1.6 percent in 2016, but analysts are forecasting a growth in gross domestic product of between 2.5 percent and 3 percent for 2017.
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.