The numbers: Total U.S. consumer credit rose $14.8 billion in January, up from a $10.7 billion gain in the prior month, the Federal Reserve said Tuesday. That translates into a 3.7% annual rate, up from a revised 2.7% gain in the prior month.
Economists had forecast a $25 billion gain in consumer credit in January, according to the Wall Street Journal forecast.
The December increase in borrowing was the smallest monthly gain since November 2020.
Key details: Revolving credit, like credit cards, rose 11.1% in January after a 6.9% gain in the prior month.
Nonrevolving credit, typically auto and student loans, rose 1.2% down from a 1.3% growth rate in the prior month. This category of credit is much less volatile.
The Fed’s data does not include mortgage loans, which is the largest category of household debt.
Big picture: On Monday, JPMorgan Chase CEO Jamie Dimon said that consumers still have a lot of money from pandemic aid. “They’re spending it, jobs are plentiful.” he said.
Inflation is taking a toll on big-ticket purchases, while squeezed consumers are using credit cards to make ends meet, said Scott Murray, an economist at Nationwide.
Overall, consumers are shying away from auto loans.
What they are saying: “We don’t expect the recent pace of growth in revolving credit to continue. While the consumer started 2023 with more momentum than expected, we think an eventual slowing in consumer spending, high interest rates and tighter lending standards will begin to constrain household borrowing,” said Nancy Vanden Houten, lead U.S. economist at Oxford Economics, in a note to clients.
Market reaction: Stocks DJIA, -1.72% SPX, -1.53% closed lower on Tuesday after Fed Chair Jerome Powell was more hawkish than the market expected. The yield on the 2-year Treasury note TMUBMUSD02Y, 5.023% jumped 11 basis points to 5.02%.