The pace of consumer borrowing slowed to $12.4 billion in June, beating economists’ expectations of $15 billion, the Federal Reserve Board reported on Aug. 7. The figure for May was $18.3 billion.
“The relative slowdown compared to the scorching rise in May still bodes well for economic health as a whole, especially coming off the back of solid GDP and jobs growth,” John Engle, president of Almington Capital, a Chicago-area family office merchant bank, said. “Consumer confidence seems to be holding steady, even in the face of political uncertainty facing both health care and tax reform.”
Consumer credit card debt rose to a record $1.02 trillion, casting a shadow over economic growth expectations.
“The concern is that this record debt, along with interest rate hikes on the horizon, and decreased consumer spending may present a drag for an otherwise red-hot economy,” John Boyd Jr., principal of Princeton, New Jersey-based The Boyd Co. Inc., said.
Acknowledging that Monday’s report received a lot of media attention, Boyd observed, “I certainly do not expect it to shame or frighten Americans to make significant lifestyle changes with respect to how they use credit. However, this is an opportunity for lawmakers to talk about making government less expensive and providing tax relief.
"I expect renewed momentum for tax reform and cutting the capital gains tax to help Americans keep more of what they earn and balance their budgets.”
“The previous (credit card debt) peak was, rather ominously, just before the 2008 economic collapse,” said Brian Davis, real estate investor and co-founder of SparkRental.com.
“Last time around, banks ended up writing off over $100 billion in credit card debt. While write-offs have ticked up slightly over the last few months, most banks remain confident in the U.S. economy, which had a strong jobs report for June. In fact, the Hamilton Project recently calculated that the U.S. job market has at last fully recovered from the Great Recession.”
Boyd expressed confidence in Trump’s ability to capitalize on the report in his tax reform efforts.
“Trump has always been a master at taking a data point or a narrative and using it to sell his brand, whether it be his ties, his hotels, his office space and now his policy agenda,” he said. “Expect the record credit card debt to be a part of the message to sell tax cuts, which I believe will be well received by the markets.”
“Most economists seem to be on the lookout for early signs that this long-expanding market, the second longest on record, is coming to an end,” Davis said, “but most recent economic data has been quite positive. It seems this aging bull still has some steam in its nostrils.”
