Consumer Borrowing Rises at 6.8% Rate in May

Americans, shrugging off worries about the strength of the recovery, increased their borrowing in May at the fastest pace in six months.

The Federal Reserve said Monday that consumer credit rose at an annual rate of 6.8% in May, the strongest rate of growth since a 15% growth rate in November.

The May increase left consumer borrowing at $1.71 trillion. The gain of $9.5 billion in May followed a revised $8.6-billion increase in April. That represented a 6.1% annual growth rate.

The May advance was about $2 billion more than private analysts had been expecting. They said the larger-than-expected gain showed that consumers were helping to keep the recovery from last year’s recession from faltering.

“Consumers are focusing on the positive rather than the negative,” said Richard Yamarone of Argus Research in New York. “They saw record low mortgage rates, rising incomes and contained prices and responded to that rather than corporate malfeasance, Middle East troubles and the collapse in the stock market.”

Demand for revolving credit, the category that includes credit cards, rose by $2.4 billion to $712.2 billion, an annual growth rate of 4.1%, down from a 7.5% growth rate in April.

Nonrevolving credit, the category that includes auto loans, rose by $7.1 billion, to $993.6 billion, an annual growth rate of 8.7%, compared with a 5.1% rate of increase in April.

Consumer spending has held up remarkably well throughout the recession, which began in March 2001, and the aftermath of the Sept. 11 terrorist attacks.

Although private economists had expected a drop in spending this year, given the rise in unemployment, consumer demand has stayed strong.

Analysts credit this to the fact that the downturn was relatively mild and the Federal Reserve has held interest rates at the lowest levels in decades, spurring home and car sales and high levels of mortgage refinancings.