Consumers — fortified by the government’s rebate checks — boosted their borrowing in June at the fastest pace in seven months.
The Federal Reserve reported Thursday that consumer credit increased at a brisk annual rate of 6.7 percent in June. That was up from a 3.8 percent growth rate in May. It marked the biggest increase since November when consumer borrowing grew at a 8.2 percent pace.
Debt rung up by consumers rose by $14 billion in June from the previous month to a total of $2.59 trillion. That was more than the $6.4 billion over-the-month increase economists were forecasting.
Demand for non-revolving credit used to finance cars, vacations, education and other things, went up at a rate of 6.6 percent in June, marking a sizable pickup from May’s sluggish 1.5 percent pace.
Meanwhile, consumers’ appetite for revolving credit, which is primarily credit cards, increased at a rate of 6.8 percent in June, a moderation from a 7.6 percent growth rate logged in May. Consumers have been forced to charge more of their purchases on credit cards as banks have tightened lending standards on other types of loans.
The Fed’s measure of consumer borrowing does not include any debt secured by real estate, such as mortgage or home equity loans.
Last week the government reported that the economy grew at a 1.9 percent pace from April through June. That marked an improvement from the prior quarter’s feeble 0.9 percent growth rate but was still considered a subpar performance.
Armed with the government stimulus checks of up to $600 per person, Americans did boost spending on food, clothing and other items in the second quarter, which helped the economy gain some speed.
With companies cutting jobs, however, a growing number of analysts believe consumers will hunker down later this year as the bracing impact of the tax rebates fades, dealing a blow to the economy. Economists closely watch consumers’ behavior because their spending accounts for a big chunk of overall economic activity.