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June 9, 2025

Consumers took on more debt in April. Consumer credit outstanding rose 4.3% at a seasonally adjusted annual rate, more than double the rate in March. Both March and February were revised lower. On a year-over-year basis, consumer credit actually fell 0.9%.

Revolving debt, made up primarily of credit cards, surged by 7% at an annual rate in April. That beat the weaker growth we saw of 1.6% in March and 0.4% in February.

Credit demand rose even though retail sales weakened in April after a stronger March when consumers bought ahead of tariffs. Unseasonably warm weather helped boost spending in certain categories including gardening equipment, furniture stores and restaurants and bars. Recall that reciprocal tariffs were announced on April 2, followed by a pause on April 9, except for China.

Consumer balance sheets continue to be stressed, as shown by rising delinquencies. by the Federal Reserve Bank of St. Louis found that shares of 30-day and 90-day delinquencies in credit cards have been rising in both the top 10% and the bottom 10% of zip codes by income. The increase has been fastest in the highest-income zip codes.

The stress on low-income balance sheets has so far not significantly affected consumption. That may be because, according to Moody's, the bottom 60% of the income distribution contribute only around 20% of all consumer spending. A rise in unemployment would start to hit consumer spending, and therefore GDP growth.

Nonrevolving debt, which includes car loans, student loans and personal loans, increased at an annual rate of 3.3% in April after gaining 2.2% in March. The March and February rates were both revised lower. Auto sales came back to earth in April after surging in March when consumers tried to front-run tariffs. Though reports suggest foot traffic at car dealerships slowed at the end of April, credit demand remained robust throughout the month.

According to the New York Federal Reserve's Household Debt and Credit report, new, seriously delinquent (more than 90 days) student loans jumped to 7.7% in the first quarter this year from 0.5% in the fourth quarter last year. Of the newly delinquent borrowers, 2.4 million had credit scores above 620. The increase in student loan delinquencies could act as a headwind for credit demand in the months ahead.