The growth of U.S. consumer credit in August slowed significantly compared to the previous month, largely due to the most substantial drop in credit card balances since March 2021.
According to recent data released by the Federal Reserve, consumer credit increased by $8.9 billion in August, falling short of economists' median forecast of $12 billion. This follows a revisited surge of $26.6 billion in July, marking the largest rise since October 2022. It's important to note that these figures are not adjusted for inflation.
Revolving credit, which includes credit cards, saw a decrease of nearly $1.4 billion. In contrast, non-revolving credit, encompassing auto and student loans, expanded by $10.3 billion.
The decline in revolving credit highlights consumers' efforts to reduce high-interest credit card debt. Despite the Federal Reserve's recent decision to initiate a loosening cycle by cutting the benchmark rate by 50 basis points in September, the impact on consumer borrowing costs will take time to materialize.