(Bloomberg) -- US consumer borrowing increased in August at a slower pace than a month earlier, restrained by the largest drop in credit-card balances since March 2021.
Total credit outstanding rose $8.9 billion after a revised $26.6 billion July increase that was the largest since October 2022, according to Federal Reserve data released Monday. The median estimate in a Bloomberg survey of economists called for an increase of $12 billion. The figures aren’t adjusted for inflation.
Revolving debt outstanding, which includes credit cards, decreased nearly $1.4 billion. Non-revolving credit, such as loans for vehicle purchases and school tuition, increased $10.3 billion.
The decline in revolving debt outstanding suggests consumers are focused on reducing credit-card balances that are carrying much higher interest rates than they were years ago. While Fed policymakers kicked off an easing cycle in September with a half percentage-points reduction in their benchmark rate, it will take time that to filter through into cheaper financing costs for consumers.
The Fed’s report showed that borrowing rates on credit cards that charge interest increased to a record 23.37% in August. A 60-month loan from a commercial bank for a new vehicle purchase rose to 8.4%, also the highest in Fed data.
A New York Fed report in August showed that while the share of overall consumer debt in delinquency held at 3.2% in the second quarter, the share of auto and credit-card loans that were newly delinquent continued to creep higher.
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