By Canadian Press

US consumer borrowing posts biggest gain since late 2017

Sep 9, 2019 | 12:49 PM

WASHINGTON — Consumer borrowing surged in July at its fastest pace since late 2017, driven by a big jump credit card use.

Consumer borrowing increased by $23.3 billion in July after a $13.8 billion advance in June, the Federal Reserve reported Monday. It was the biggest monthly gain since a $29.9 billion jump in November 2017.

The large July gain was led by a sizable increase in borrowing in the category covering credit cards, which rose by $10 billion in July after having fallen by $186 million in June.

Borrowing in the category that covers auto and student loans also posted a sizable gain, rising by $13.3 billion in July following a $14 billion June increase.

Consumer borrowing is closely watched for signs it provides about consumer spending.

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The economy has encountered headwinds this year in areas such as manufacturing and export sales, reflecting uncertainties caused by President Donald Trump’s trade war with China and a slowing global economy.

But those adverse shocks have been cushioned by strength in consumer spending, which accelerated in the spring to the fastest pace in five years after a weak start to 2019. Consumer spending accounts for about 70% of U.S. economic activity.

Economists are looking for household spending to continue to be solid for the rest of this year, helped by rising wages and the lowest unemployment rate in nearly a half century.

The overall economy, as measured by the gross domestic product, grew at a 3.1% rate in the first quarter, reflecting some special factors, but slowed to growth of 2% in the April-June quarter. Economists are forecasting GDP growth will average around 2% in the second half of this year.

The July increase pushed total consumer credit to a record $4.1 trillion. The Fed’s monthly credit report does not cover mortgages or any other debt secured by real estate such as home equity loans.

Martin Crutsinger, The Associated Press