Every month since September consumer spending in the U.S. has been increasing. And while this may be taken as a good sign that people are once again starting to feel more financially confident since the recession, this uptick in spending may also be linked to people having to rely on credit to pay for every day expenses.
According to the Federal Reserve, overall debt rose by $5.08 billion in May after increasing $5.67 billion in April. This debt includes both revolving, like credit card debt, and also non-revolving, like that from student loans.
In general, this is a higher figure than the $4 billion average increase that most experts predicted. The prediction came from a group of 37 economists whose thoughts on the increase ranged from $3 billion to $6.5 billion, with $4 billion being the median amount.
When looking at reasons why borrowing increased, sources report that revolving debt played a large role and rose in response to unemployment and high gas prices.
However, those same high gas prices also impacted other areas of the economy as the overall number of big expensive purchases, like a car, actually decreased.
When looking to the future, with the unemployment rate climbing all the way to 9.2 percent in June and gas prices still rather high in parts of the country, there is a possibility that the total amount of revolving debt will only increase as consumers continue to use credit to make up for the finances they’re losing.
However, it’s important to keep in mind that there are debt relief options available for those who are relying on credit cards, and also those who have racked up quite a bit of debt from continuously swiping their card.
Source: Bloomberg, “Consumer Borrowing in U.S. Increases, Led by Credit Cards,” Jillian Berman, 8 July 2011