WASHINGTON -- U.S. consumers reduced their borrowing for a third-straight month in May as the millions of jobs lost because of the coronavirus pandemic made households less eager to take on new debt.
The Federal Reserve reported Wednesday that consumer borrowing declined by $18.3 billion in May, a drop of 5.3%. Borrowing had fallen 4.5% in March and then plunged 20.1% in April. That was the biggest one-month decline in percentage terms since the end of World War II.
Borrowing by consumers in the category that covers credit card debt fell $24.3 billion in May after April's record $58.2 billion decline. Borrowing in the category that covers auto loans and student debt rose $6 billion, reversing part of a $12 billion decline in April.
Consumer borrowing is closely watched because of clues it can provide about the willingness of households to take on more debt to support consumer spending, which accounts for 70% of U.S. economic activity.
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The Trump administration is forecasting a sharp rebound in the July-September quarter but private economists are worried that the resurgence of coronavirus cases in recent weeks in many areas may put the recovery at risk.
It marked the first time in a decade that overall consumer borrowing has fallen for three straight months. The declines left total borrowing at a seasonally adjusted $4.11 trillion in May.
Nancy Vanden Houten, senior economist at Oxford Economics, said that while consumer spending did show a big gain in May, consumers financed the increased spending with their savings and not through higher borrowing.