Consumer credit surged in July

September 9, 2024

Consumers took on more debt in July. Consumer credit jumped at a seasonally adjusted, annual rate of 6% after rising a downwardly revised 1.2% in June. Total credit outstanding rose by $25 billion, more than double expectations. The three-month moving average surged in July to $14.1 billion, up from only $4.8 billion in May. That has moved above the 2010s average of $13.6 billion for the first time since July 2023. Consumer credit outstanding rose 1.9% year-over-year, up from 1.6% last month.

Revolving debt, which is primarily made up of credit cards, rose 9.4% in July at an annual rate after falling in June. That is the highest rate since February of this year. Total revolving debt hit an all-time high. Continued discounting helped draw in consumers to make purchases. That marks a reversal from earlier in the year, when borrowers slowed their credit card usage as rates hit well over 20%. There is stress, especially for low-income households and younger consumers. The good news is that the impending rate cuts by the Federal Reserve should help make a dent on credit card interest rates.

Nonrevolving debt, which includes car loans, student loans and personal loans, rose at an annual rate of 4.8% after gaining 1.8% in June. Nonrevolving debt hit an all-time high. The jump partially reflects the surge in purchases of motor vehicles. A cyberattack against 50,000 dealers hurt sales in June and pushed those purchases into July.

The series for consumer credit does not adjust for inflation. Even as inflation nudged higher month-over-month in July, real consumer credit outstanding settled at 0.3%. That is the third straight month consumer credit has grown in real terms after declining for five straight months.