Consumer credit slows sharply in April

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Growth in student loans is a major factor in rising consumer credit

Consumer borrowing slowed in April to the smallest increase in almost six years, suggesting an expected rebound in spending in the second quarter may not be as robust as hoped.

Total consumer credit rose $8.2 billion in April to a seasonally adjusted $3.82 trillion, posting an annual growth rate of 2.6%, the Federal Reserve reported Wednesday. This is down from a revised $19.5 billion gain in March.

The April increase was also well below economist estimates for a $17 billion gain in consumer credit, according to Econoday, and is the slowest monthly growth rate since August 2011.

The main source of credit growth, nonrevolving credit, which covers loans for education and cars, slowed sharply in April. This category rose at a tepid annual rate of 2.9% in April, which was also the slowest pace since August 2011.

Revolving credit, which is mostly made up of credit card loans, increased at an annual rate of 1.8% in April, compared with a rise of 6.5% in March.

Economists are watching the consumer closely as they expect spending to drive growth in the remainder of 2017 after the weak start to the year.

Consumer spending, which accounts for two-thirds of U.S. economic growth, rose at a 0.6% annual rate in the first quarter, down from fourth-quarter growth of 3.5%. As a result, first quarter GDP growth rose at a weak 1.2% annual rate.

Economists have predicted consumption would pick up in the second quarter given the low unemployment rate and improving household balance sheets.



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