Consumer Credit Explodes in June, Further Proving Consumer Claims Unfounded
Last week, we at Total Bankruptcy expressed doubt about the reports from a consumer survey suggesting that consumers were cutting back on using credit cards recently. Respondents in the Javelin Strategy & Research online survey reported buying goods from stores such as Target and Wal-Mart and not eating out at restaurants as much as they previously had. 37 percent reported that they were using their credit cards less.
But in the article, we looked at data from the Federal Reserve that amply demonstrated that while the amount of outstanding revolving credit had decreased in April, increases in May suggested that consumers were back to buying with credit. Of course, trying to maintain their pre-recession standards of living might cause many individuals to turn to credit for staples, such as gas and groceries.
Now, the Federal Reserve numbers from June have been released, proving our skepticism to be founded. As the Washington Post reports, consumer credit rose by a whopping $14.33 billion, with revolving credit accounting for $5.49 billion, or a 6.8 percent rate of increase. In fact, the overall number is the fastest expansion of credit in seven months.
Perhaps asking consumers whether or not they're using credit to buy luxury items is misguided: instead, it would be interesting to see how many consumers used credit cards to buy gas, groceries, school supplies, and a host of other basic necessities. The numbers suggest it's becoming more and more common as the economic downturn wears on.