Consumer borrowing is closely watched for signals it can provide about consumer spending patterns. With the labor market continuing to churn out jobs and the stock market at record levels, economists believe that households will feel more confident about boosting their debt levels to support increased spending. Consumer spending accounts for 70 percent of economic activity.
The strength last month reflected a greater use of credit cards, which rose by $7.4 billion, much stronger than the $1.2 billion April increase. The category that includes auto loans and student loans increased $11.05 billion, slightly lower than April's $11.8 billion gain. Auto sales have been slowing this year after last year's record pace.
The $18.4 billion rise in credit pushed borrowing measured in the monthly report to a fresh record of $3.84 trillion. The Fed's monthly credit report does not cover home mortgages or any other debt secured by real estate such as home equity loans.
A separate report prepared by the Federal Reserve Bank of New York said that total U.S. household debt, covering all loans including mortgages, reached a record high in the first quarter of this year, topping the previous peak reached in 2008 as the financial crisis was plunging the country into a deep recession.