Minneapolis CNN —
US consumers’ credit-hungry spending stance continued in November, with borrowing rising by nearly $28 billion, according to Federal Reserve data released Monday.
The monthly increase, which was driven by higher revolving lending rates, was below the $29.12 billion increase seen in October, but extends an historic time span of debt dependence during a year of rising inflation.
Economists were expecting a monthly increase of $25 billion, according to consensus estimates on Refinitiv.
Outstanding consumer loans — which mainly include credit cards, auto loans and student loans — grew at a seasonally adjusted annual rate of 7.1%, according to the report. Revolving credit, which includes mostly credit cards, grew 16.9%.
It’s the biggest rise in revolving credit in three months and the fifth-biggest monthly rise in Fed records in nearly 55 years.
“I think we can attribute a lot to that [revolving debt increases] Christmas shopping,” said Ted Rossman, senior industry analyst at Bankrate and Creditcards.com. “Of course, inflation is no doubt playing a role, but it appears to be picking up again after slowing somewhat in late summer, early fall.”
The rise in outstanding loans exceeds the amount people are bringing in: Average hourly earnings rose 4.8% annually in November, according to the latest data from the Bureau of Labor Statistics.
During this period of high inflation, consumers have borrowed more to spend – but they’ve also kept their finances afloat for the most part.
However, household balance sheets are showing some signs of weakening, with various federal data showing that arrears are rising and savings levels are falling.
“It’s really revolving credit, mostly credit card debt, that’s the order of the day right now,” Rossman said. “A lot of that would relate to the essentials, some of it to discretionary things too; but with an average credit card rate of nearly 20%, it’s difficult to top up your balance.”
The Federal Reserve was quick to raise interest rates to cool inflation. This has led to historically high, if not record-breaking, interest rates on auto loans, credit cards, and personal loans. Monday’s Fed report showed that the average interest rate on a 60-month new car loan was 6.55%, credit card plans 19.07% and personal loans 11.23%.
Separate data released Monday by the Federal Reserve Bank of New York showed that Americans are broadly optimistic about a slowdown in inflation.
Average inflation expectations for the coming year fell 0.2 percentage point to 5% in December, the lowest since July 2021, according to the latest New York Fed Consumer Sentiment Survey.
The survey also found that consumer expectations for spending growth fell 1 percentage point to 5.9% — the lowest since January 2022, the report said.