US consumer borrowing likely rose in May, but gains potentially smaller than in April

Lifestyle and Budget Associated Press

The Federal Reserve will report on consumer borrowing in May. The report will be released Tuesday at 3 p.m. Eastern time Tuesday.

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BORROWING UP: The expectation is that consumer borrowing increased by $18.1 billion in May, according to a survey of economists by financial data firm FactSet.

CREDIT GAINS: In April, consumer borrowing increased by $26.8 billion. Credit card use rose 12.3 percent compared with the prior month, the fastest pace since November 2001. Auto and student loans also increased.

Increased borrowing is usually a positive sign for economic growth. It suggests that people are more confident about their prospects and willing to take on debt. That, in turn, can help drive consumer spending, which accounts for 70 percent of U.S. economic activity.

Credit card debt plummeted during the recession. An average household had $8,740 in credit card debt when the downturn started at the end of 2007, according to an analysis of Federal Reserve Bank of New York figures by the financial data firm NerdWallet.

That figure steadily dropped through the middle of 2011, but recently plateaued around $7,100 with people still hesitant to take on high-interest debt. Credit card borrowing is up only 2.2 percent over the past year, lagging both auto and student loan growth, which have increased by a combined 8.2 percent over the past year.

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Student loan debt has been the biggest driver of consumer borrowing since the recession ended in June 2009, according to New York Fed data.