US Consumer Lending Rises in May as Confidence Grows
By TLB Contributing Author: Sally Phillips
US consumer’s appetite for credit rose in May, at the fastest pace in six months, recent Federal Reserve data shows. Separate survey data shows consumer confidence is also growing, that’s despite two rate hikes from the Fed so far in 2017.
Official Federal Reserve data showed total consumer credit rose 5.8% in May, or by $18.4 billion, from a year earlier. That was a sharp gain from the 4.1% rise reported in April. In addition, the increase was the biggest since a $25.1 billion climb in November 2016, and was driven largely by credit card spending, the figures show.
Stronger Consumer Confidence
A separate survey from the New York Fed highlighted an increase in consumer confidence, in June. The improvement in US consumer’s outlook was driven by numerous details:
• Expectations that inflation would slow.
• The view that wage growth would rise.
• Fewer respondents were worried about missing debt repayments.
• A series high proportion of respondents reporting they were financially better off.
The rise in both consumer borrowing and confidence likely surprised many as it follows two, albeit small, rate hikes from the Fed in the first half of 2017. While it’s unclear how quickly future rate hikes will be announced, it’s certain the Central Bank is ready to remove it’s support from the financial markets.
According to financial experts and industry specialist MoneyBanker, if the markets show signs of being spooked, then consumer credit rates could begin to rise in anticipation of future Fed rate hikes, regardless of more certainty of the timing of them.
Timely Credit Standards Change
While the Fed rates hike uncertainty is currently in the background for many consumers, there’s a chance they will get a further confidence boost from the news that credit history checks will no longer rely on unconfirmed details on their file.
As of July 1st, the FICO credit History score will only include tax liens that are supported by fully verified notices. Now, any judgments must be accompanied by a social security number or date of birth that matches with the credit applicant’s name and address. Credit bureaus will also remove any public records that hold information where the customer details aren’t fully verified. This will give some US consumers a better credit score which could potentially open up additional lines of credit to them.
The timing of this move could prove a welcome boon to those who have potential, future Fed rate hikes in the back of their mind. That’s because a better credit rating typically gives consumers access to lower interest rates and lending terms.
Indeed, with a better credit rating, one or two more small Fed rate hikes might not push your repayment terms too far out of reach, after all. And that could mean a further rise in confidence and increased appetite for credit in the months ahead.
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About the Author: Sally Phillips is an avid researcher, author and concerned citizen, who feels it is her mission to make people aware of the facts behind the many concerning issues they face today in their daily lives.
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