WASHINGTON – Consumer borrowing posted a hefty increase in May, reflecting the biggest jump in credit card debt in six months.
The Federal Reserve reported Monday that consumer credit rose at an annual rate of 6.4 percent in May, far above the small 1.1 percent gain of April. The advance was about double what analysts had been expecting.
The increase was propelled by a surge in the category that includes credit cards, which rose at a rate of 9.8 percent in May after having a tiny increase of 0.2 percent in April. The jump in credit card debt was the largest since a 14.5 percent rate of increase in November.
The category of consumer credit that includes auto loans was also up in May, rising at a 4.4 percent rate after a 1.7 percent gain in April.
The size of the increase caught economists by surprise, although they had been expecting a pickup from the sluggish performance in May, when the 1.1 percent rise in overall credit was the smallest gain since a 0.1 percent rise in October.
The overall economy, weighed down by a steep slump in housing, grew at a lackluster rate of 0.7 percent in the January-to-March quarter, the weakest showing in more than four years.
But economists believe strength in employment and consumer spending will help provide a stronger performance in the April-June quarter, with many looking for the gross domestic product to expand at a rate of 3.5 percent or even better.
The report on consumer borrowing will provide support for the view that consumer spending has held up, despite the weakness in home sales and soaring gasoline prices during the spring.
For May, consumers increased their borrowing by $12.9 billion to a record level of $2.44 trillion. Economists had been forecasting that consumer borrowing would rise by a much smaller $6.5 billion.