The Federal Reserve recently revealed that credit card use spiked last October. The Federal News Network reported that this is the biggest increase in lending for three months.
According to the Fed, the seasonally adjusted credit card usage in October is at a whopping $18.9 billion. This is a significant jump from September which is only $9.6 billion. With this, the total borrowing amounted to $4.17 trillion.
The Federal News noted that consumer credit is being observed carefully “for indications that people are willing to keep borrowing to finance their spending.”
It is important to note that the United States’ economic activity is composed of 70% consumer spending. In fact, it is considered as a “standout performer” in the country’s economy in 2019. It served as a safety net even as business investment fell due to trade wars and weak global growth.
Because of this, forecasts say that consumer spending will still rank as the most important factor in expanding the country’s economy. It is expected to offset the weak activity in other areas.
Tufts University economist Brian Bethune noted that the labor market is strong and has the potential to maintain the level of consumer spending in the coming quarters. The strength of the labor market is even expected to lead to spending growth.
Brian remarked that the Federal Reserve had lowered rates in 2019 and “has kept the economy growing at a reasonable rate.” He also said that fears of an impending recession have been reduced. Meanwhile, credit cards are responsible for the highest recorded growth in lending in a three-month span, starting from August. Fed data showed that the overall jump in borrowing jumped by $7.9 billion from a measly $187 million in August.
Meanwhile, auto and student loans increased by $11 billion which reflects another increase from $9.4 billion in September.