The Federal Reserve released a surprising report late Friday that's sure to be overshadowed by July's unemployment numbers. The central bank says that U.S. consumer credit rose by 7.7%. This isn't just the most in nearly four years, it's by far the most since mid-2008. How did this happen?
Here's the chart:
This is total credit, but if you split it up between revolving (credit cards) and non-revolving (auto loans, student loans, etc.), then you see similar results. They rose by 7.9% and 7.6%, respectively in June. In the case of credit cards, this is particularly surprising. May marked just the second time in 34 months credit card balances had risen. And now in June, they soared nearly 8%.
These statistics look even stranger in light of what we know about June: nominal consumer spending declined (though inflation-adjusted spending was about flat). If consumers spent less money, how did they manage to drive up their credit balances by so much?
I'm puzzled by this one. Are Americans hoarding cash and taking out more consumer loans while boosting their credit card balances? There's no good explanation for why this might be happening. Incomes actually also rose in June and prices fell, so they aren't being squeezed harder either.
The sudden jump in consumer credit in June is a pretty perplexing development. Anyone with any theories of what's going on here, please share in the comments!