The American consumer is making a triumphal return.
After several months of subdued increases in consumer credit, moments ago the Fed reported that in May, total consumer credit surged by the most on record, soaring by $35.28 billion, nearly double the consensus estimate of $18 billion and sharply higher from last months' $20.04 billion. The monthly increase was a whopping 10% SAAR, pushing the total to a new record high of $4.279 trillion.
What was behind the surge? Well, one month after we noted a surprising dip in credit card usage in April, in May Americans went all out, and splurged, pushing revolving credit, i.e., credit card debt, higher by a whopping $9.2 billion, the biggest monthly increase since December 2019, and pushing total revolving debt to $974.6 billion.
In light of this indiscriminate desire to "charge it", one can't really blame Wells Fargo for doing away with lines of credit: just give Americans credit cards and charge them a juicy 20% APR on all future purchases.
But if the spike in credit card debt was notable, it was the explosion in non-revolving debt, i.e., auto and student loans, that was the true outlier in May when it surged by a record $26.1 billion, the biggest monthly increase on record!
This latest shift in spending patterns, means that things are now indeed back to normal, and that with consumers now spending not just using their debit cards (which is where the stimmy checks arrive) but their credit cards, Americans are once again highly confident about the future, and are spending far beyond their means, as they always tend to do. Either that, or the latest batch of stimmies has now been spent, and having no other source of funds American consumer are again resorting to their trusty old credit card to provide that much needed 70% consumption component of GDP...