Consumers cut the card

July 8, 2026

Consumer credit edged down less than 0.1% in May. That was the first decline since November 2024. On an annual basis, consumer credit expanded 2.1%, the slowest pace in the last six months. A decline in revolving credit was nearly offset by an increase in nonrevolving debt.

Revolving debt, made up primarily of credit cards, fell 4.7% in May after reaching double digit growth in April. May retail sales topped expectations due to soaring prices at the pump. While higher income consumers continue to spend on food, entertainment and travel, lower income consumers are pulling back - trading down or closing their wallets for products that were formerly purchased. Spending at restaurants and bars ticked down in May.

Nonrevolving debt, which includes car loans, student loans and personal loans, rose 1.6% in May, following solid a 2.9% gain in April and 3.8% in March. Used as well as new vehicle loans are included in that mix. New vehicle sales edged down on a unit basis in May but rebounded in June. The vehicle producers have worked hard to absorb the effects of tariffs and other cost shocks, but new vehicle purchases are more concentrated among high-income households due to cost issues. 

Student loans continue to be a thorn in the side of consumers that borrowed for their education. New student loan borrowers are being offered two new repayment plans that may cause higher monthly payments.  

Some 2.6 million borrowers had their loans transferred back to the Department of Education as their loans were in full default. That lowered delinquencies on student loans but for the wrong reason. Delinquencies remain near a record high and are still in the double digits; older Generation X borrowers are struggling the most. 

The personal saving rate has fallen to its lowest point since mid-2022, another period of elevated inflation and eroding purchasing power. The saving rate is a residual measure of income less consumer spending in any given month; it does not reflect the asset-based wealth cushion an individual may already possess. 

The problem is those with the largest cushion are those who need it least in a world where purchasing power is eroding due to higher inflation. Workers with large stock portfolios are some of the few to see their wages rise more rapidly than inflation.