Consumer credit up 4.8% as discretionary spending stays firm
U.S. consumer credit rose at a 4.8% seasonally adjusted annual rate in April, with revolving credit climbing 10.4%, a sign that households are still using credit to fund spending rather than pulling back sharply. J.P. Morgan’s latest card-spending snapshot also showed discretionary spending up about 2.6% month-to-date in May, reinforcing the view that consumer demand has not cracked yet.
What Happened
The Federal Reserve’s G.19 release showed total consumer credit expanding at a 4.8% annual rate in April, led by the faster pace in revolving balances, which typically includes credit cards. Nonrevolving credit rose 2.9% annualized, a more subdued pace that suggests the strongest momentum is still in short-term consumer borrowing rather than longer-term installment lending.
That matters for the consumer discretionary complex because revolving credit growth often tracks spending behavior at the margin. When card balances are rising faster than nonrevolving debt, it can indicate consumers are still willing to finance travel, dining, apparel and other nonessential purchases even in the face of sticky prices.
J.P. Morgan said its Chase card data pointed to total spending growth of roughly 2.1% month-to-date in May, while discretionary spending was up around 2.6%. The firm also lifted its second-quarter consumer spending forecast to 3.0% from 2.0%, citing resilient monthly trends and still-supportive labor-market conditions.
Analyst Take
For investors, the message from the latest credit and spending data is less about a headline acceleration and more about the absence of a clear downshift. J.P. Morgan’s economics team said the monthly trends do not point to “any real downshift yet,” which is important for retailers, payment networks and consumer lenders that depend on steady transaction growth.
The read-through is supportive for discretionary names tied to card usage and nonessential demand, especially if upcoming retail sales data and second-quarter earnings confirm that spending is holding up. At the same time, rising revolving credit can eventually become a pressure point if delinquencies begin to move higher or if consumers lean more heavily on cards to bridge budget gaps.
What to Watch
- Retail sales for confirmation that discretionary demand is still intact.
- Credit-card delinquency trends, especially if higher balances start to translate into stress at lower-income households.
- Second-quarter earnings from major payment and consumer finance companies for management commentary on spending momentum.
- Consumer discretionary stocks for any gap between strong card-data trends and actual reported sales at retailers.