The Federal Reserve reported that borrowing increased by $18.6 billion in May, an increase from $13.4 billion in April. Borrowing in the auto and student loan category climbed 16.2 billion. Borrowing in the credit card category increased 2.4 billion.
This gain in May pushed total consumer credit to a record 3.62 trillion. Consumer spending, which accounts for 70 percent of economic activity, is expected to surge, helping boost the overall economy. Non-revolving debt, a category that includes auto loans, student loans, boats, and vacations accounts for $16.2 billion of the total increase.
Student loans and motor vehicle loans typically represent the bulk of non-revolving credit. Due to easy credit, subprime auto loans likely played a part in this.
Economists are forecasting that second quarter growth will accelerate to a rate of around 2.5 percent. The increase is due to the expected employment growth, which slowed this spring, but will continue to increase in the coming months. A recent report reveals employers added 287,000 jobs in June, a substantial improvement from the small gain of 11,000 jobs in May.
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