The numbers: Consumer borrowing made a third straight modest monthly increase in April, according to Federal Reserve data released Monday.
Total consumer credit increased $18.6 billion in April. That’s an annual growth rate of 5.3%. Consumer credit is growing at a slow but steady pace, rising $18.2 billion in February and $18.6 billion in March.
Economists had been expecting a $20 billion gain, according to a Wall Street Journal forecast. Credit in March was revised down from prior estimates of a $26 billion gain.
What happened: Overall, consumer credit rose because of the strong trend in student loans and growth in auto loans.
Revolving credit, like credit cards, decreased 2.4% in April after a 1.7% gain in the prior month.
Nonrevolving credit, typically auto and student loans, rose 7.6% after a 6.4% gain in March. This category of credit is much less volatile. It only fell briefly at the start of the pandemic before returning to steady growth.
The Fed report does not include mortgage loans, which is the largest category of household debt.
Big picture: In order for the economy to boom, as some economists expect, retail sales will have to stay strong.
James Sweeney, chief economist at Credit Suisse, thinks that retail sales are set to plummet. “Overshooting goods consumption was the predictable outcome of extreme fiscal stimulus, social distancing, and a housing boom,” he said in a note to clients this weekend.
But Jonathan Silver, founder and CEO of Affinity Solutions, a global data firm that collects debit and credit-card transactions, disagreed, saying that Americans continue to spend. “Our data tells us people are spending money,” on entertainment, travel and other categories of spending differed due to the pandemic, Silver said in an interview.
What are they saying? “Overall, consumer balance sheets have improved markedly since the pandemic (at the aggregate level) as they spent a bit less than a third of the stimulus and used the balance equally to pay down debt and increase savings,” said T.J. Connelly, head of research at Continent Macro.