Americans are borrowing more with a steady job market and low gas prices backing consumer confidence.
In July, consumer credit swelled at a 6.7 percent annual rate to reach $19.1 billion after climbing every month for almost four years straight, the Federal Reserve said.
Revolving credit increased at a 5.7 percent annual rate, compared to a 10 percent annual increase noted in June. On the other hand, demand for nonrevolving credit, which mostly constitutes long-term loans like student, home and auto, grew 7 percent annually with 9.4 percent reported in June, The Wall Street Journal noted.
The report comes after the Department of Commerce credited an increase in wages for fueling a boost in spending, which accounts for over 66 percent of demand in the U.S. economy, in a report released in late August this year.
“The consumer is pretty much chugging along,” Tom Simons, an economist at Jefferies LLC in New York, told Bloomberg. “It’s clearly encouraging to see the wage gain. We definitely need more of that to see a sustained acceleration in consumption.”
Certain industry domains, like building contractors and home remodeling, emerged to be the largest wage growth areas, with a 15 percent growth observed an year before, according to the latest PYMNTS Storefront Business Index.
Lower prices are now “starting to have an impact on [consumers’] spending decisions because they now no longer expect gas prices to quickly rebound to the previous levels,” said Richard Curtin, director of the Michigan Survey of Consumers, in an interview with Bloomberg.
The increase in spending and borrowing also reflected upon an increase in retail sales, which showed a 0.5 percent growth over previous months in July.
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