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Unprecedented Growth in US Consumer Borrowing: Analyzing the Implications

In March, US consumer borrowing experienced a larger-than-anticipated increase, marked by one of the most substantial spikes in credit card balances ever recorded. As a result, total credit surged by $26.5 billion, the most significant growth in four months, following a February increase of $15 billion. This data, provided by the Federal Reserve, is not adjusted for inflation and surpasses the median prediction of a $17 billion rise, as estimated by a Bloomberg survey of economists.

A Notable Jump in Revolving Credit Outstanding

Revolving credit outstanding, which encompasses credit cards, witnessed a $17.6 billion leap, almost triple the growth observed in the previous month and the largest in a year.

Low unemployment continues to play a pivotal role in supporting consumer spending. However, many Americans now opt to save more and curtail their spending. In contrast, some individuals face financial difficulties, relying on credit cards to bridge the gap.

A recent Morning Consult for Bloomberg News poll revealed that over 50% of Americans lack the financial means to manage an unexpected $400 expense without incurring debt.

Non-Revolving Credit Indicates Steady Borrowing for Large Purchases

The Fed’s report also indicated an $8.9 billion increase in non-revolving credit. That includes loans for education tuition and vehicle purchases. This growth suggests that consumer borrowing for significant expenditures remains stable despite tightening credit conditions.

The banking upheaval that has shaken markets and strengthened many economists’ anticipation of a recession later this year originated in March with the collapse of Silicon Valley Bank. Since then, two additional American banks have faltered, and apprehensions are growing about the economic repercussions of stricter credit conditions.

The recent surge in US consumer borrowing, particularly in credit card balances, raises important questions about the financial stability of American households. As the threat of a recession looms, it is crucial to monitor and analyze these trends to better understand the potential implications for the economy as a whole.

JP Buntinx
JP Buntinx has been writing about cryptocurrency since 2012. His interest in crypto, blockchain, fintech, and finance allows him to cover a broad range of different topics.