Borrowing Ramps Up Amid Strong Labor Market

In January, the amount Americans borrowed exceeded expectations, with non-revolving credit experiencing its most significant increase in seven months. The Federal Reserve’s Thursday release shows total credit swelled by $19.5 billion, eclipsing December’s revised uptick of $919 million.

Consumer credit outstanding has now hit an all-time high of $5.04 trillion. Specifically, non-revolving credit, covering car purchases and education loans, climbed $11.1 billion. Credit card and other revolving debts rose by $8.4 billion without adjusting for inflation, highlighting consumers’ growing reliance on credit.

This borrowing surge ties back to a strong labor market that has fueled consumer spending for the past two years. Even as Federal Reserve rate hikes make borrowing costlier to curb inflation, consumers have not shied away from using credit cards, leading to record levels of non-mortgage interest payments by U.S. households.

After a vigorous holiday shopping season, retail spending took a downturn in January, experiencing its sharpest fall in nearly a year. This dip might signal a momentary pullback in consumer expenditure amid evolving economic conditions.

Read the full story at Bloomberg.