Consumer Borrowing in U.S. Rises $19.6 Billion, Most in Year

[Purveyor]

Source: Bloomberg

By Jeanna Smialek - Jul 8, 2013
Consumer borrowing in the U.S. climbed in May by the most in a year as Americans put more purchases on their credit cards and took out more school and automobile loans.

The $19.6 billion increase in credit followed a revised $10.9 billion gain the previous month that was less than initially reported, Federal Reserve figures showed today in Washington. The median forecast in a Bloomberg survey called for a $12.5 billion advance.

The boost to household wealth from recovering property values and higher stock prices is putting Americans in a position to capitalize on lower interest rates and purchase costlier items, such as cars. Confidence to borrow is also being punctuated by faster job and income growth that will help sustain the consumer spending that accounts for about 70 percent of the economy.

“Demand for credit is picking up,” said Kevin Cummins, an economist for UBS Securities LLC in Stamford, Connecticut. “Job gains do suggest that income growth is running at a healthy clip, and we’re likely to see consumer spending pick up in the back half of the year.”

Read more: http://www.bloomberg.com/news/2013-07-08/consumer-borrowing-in-u-s-climbs-19-6-billion-most-in-a-year.html

[DallasNE]

1. Faulty Analysis

What borrowing does is to accelerate current spending, robbing from future demand to some extent so that doesn't support consumer spending picking up in the back half of the year, particularly when it is expensive credit card debt. Also, income growth that comes almost exclusively from "recovering property values and higher stock prices" is not sustainable income growth that is very over weighted to the top 1% meaning it should be mostly discounted as a factor in consumer spending because that money does not turn over at nearly the rate of wage income.