Even before we have the quarterly data fromVisa and MasterCard, we know that credit card-based spending is up.And American Express’s recent earnings report showed credit andcharge card spending up significantly.
Is this the long-awaited turnaround in card-based borrowing? Onone hand, the Fed’s G19 reading for May for consumer revolvingcredit outstanding was up 5.1 percent on a preliminary basis. Thiscertainly reflects an increase in spending, although we will haveto see if the outstandings stick for more than one monthly cycle(e.g. December 2010 outstandings increases dissipated in Q1/2011 asconsumers paid them off quickly).
On the other hand, recent analysis of First Data’s SpendTrendreport for June suggests that much of the significant increases incredit card transactions are the result of increased spending ongasoline and food (http://www.bloomberg.com/news/2011-07-21/consumers-in-u-s-relying-on-credit-as-inflation-erodes-incomes.html).In fact, gasoline purchases on credit cards were up 39 percent yearover year, and food purchases were up 5 percent, a swing of 12percent from last year.
In another month or two, we should have a good data picture ofwhether these trends represent a shift toward borrowing byconsumers, or whether consumers are simply choosing to use theircredit cards for large ticket purchases (of which gasoline is nowone!) only to pay them down in the following account cycle. As manyretailers point out, this is one scenario where an upturn inborrowing is not a healthy trend, i.e. consumers having to borrowfor necessities.
When it comes to a revival in credit card borrowing, let’s becareful what we ask for!