The numbers: Consumer borrowing accelerated in April at the fastest pace in five months, the Federal Reserve said Friday. Total consumer credit increased $17.5 billion in April, an annual growth rate of 5.2%. That’s up from a 3.3% rate in the prior month. Economists has been expecting a $13 billion gain, according to Econoday.
What happened: Revolving credit, like credit cards, rebounded sharply in April, rising by 7.9% after a relatively rare drop of 2.3% in March. Nonrevolving credit, typically auto and student loans which don’t have as much volatility month-to-month, rose 4.2% after a 5.2% gain in March.
Big picture: Economists are watching the consumer closely because strong spending is a main factor behind forecasts that the expansion will remain on track this year.
Since the start of the year, consumer spending has been a mixed bag, amid some evidence that people are becoming strained financially. The effect of the Trump tax cut, a boost to growth last year, clearly seems to be waning, at least for households.
On top of this, unexpected weakness in the May job report, released earlier Friday, suggests a more cautious consumer in coming months.
Market reaction: The Dow Jones Industrial Average
was up nearly 300 points in early afternoon training on expectations the weak job report may prompt the Fed to cut interest rates soon to counter negative sentiment about the outlook.