The numbers: Consumer borrowing slowed in June after hitting a six-month high in the prior month, according to the Federal Reserve on Tuesday. Total consumer credit increased $10.2 billion in June to a seasonally adjusted $3.91 trillion. That’s an annual growth rate of 3.1%. Economists had been expecting a $16 billion gain, according to Econoday. Credit had risen $24.3 billion in May.
What happened: Revolving credit, like credit cards, declined by 0.2% in June after an 11.2% gain in May. This is the second drop in credit-card use in the past four months. Nonrevolving credit, typically auto and student loans, rose 4.4% in June and has been rising at a relatively steady pace.
Big picture: Consumer spending was strong, rising at a 4% annual rate in the second quarter after a sharp slowdown in the first quarter. And with the labor market tight and wages rising, economists are counting on the consumer to keep GDP growth near 3% over the remainder of the year. At the same time, consumers use of credit cards has been on a downward trend. The Fed reported Monday that banks tightened standards on credit cards in the second quarter, which may account for some of the slowing trend.
See: Banks tighten credit-card standards, loosen terms for business loans, Fed says
In addition, the government revised its GDP data last month to show that Americans are saving more than previously thought. The savings rate was actually twice as high in 2017 at 6.7% than prior estimates.
These upward revisions suggest that Americans haven’t been dipping into the savings to fund purchases, said James Glassman, economist at J.P. Morgan Chase.
Read: The mysterious slump in how much Americans save is a mystery no longer
Market reaction: U.S. stock benchmarks climbed Tuesday in lock step with a global equity rally with the Dow Jones Industrial Average
up 160 points to 25,662.