US consumers borrowed more in May than at any time since November as their spending helped fuel a rebounding economy.
Borrowing through credit cards and other types of loans increased by US$9.5 billion after an US$8.6 billion rise in April, the Federal Reserve said.
"Consumer spending is alive and well," said Sung Won Sohn, chief economist at Wells Fargo & Co in Minneapolis. "The consumer's willingness to borrow is really the best confidence indicator of the economy."
General Motors Corp encouraged borrowing by offering discounts to sell more vehicles in June, and that may boost borrowing in coming months. Consumer spending is important because it accounts for two-thirds of the economy.
Non-revolving credit, which includes automobile loans, rose US$7.2 billion in May after rising US$4.2 billion the prior month.
Credit card and other revolving debt rose US$2.4 billion in the month, following a US$4.4 billion increase in April. May borrowing was the most since a US$20.4 billion surge in November.
Consumers are able to take on more debt because incomes are on the rise. Personal incomes were 3 percent higher in May than a year earlier, the largest year-over-year increase in seven months, government figures show.
"Real wage income has been growing solidly which, along with low interest rates, has been supporting consumer sales," said Steven Wood, chief economist at FinancialOxygen Inc, a Walnut Creek, California, provider of financial services to banks.
The Fed's consumer credit report doesn't include loans secured by real estate, such as mortgages and home equity lines of credit. Mortgage debt is more than three times the amount of credit card debt, auto loans and other personal borrowing. Home mortgage debt increased to US$5.87 trillion at the end of the first quarter from US$5.74 trillion at the end of the fourth.
Consumer spending rose at a 3.3 percent annual pace from January to March, after rising at a 6.1 percent rate in the last three months of last year. Spending fell 0.1 percent in May.
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