Consumers slammed the brakes on borrowing in December, Fed data show

The numbers: Total consumer credit rose $1.5 billion in December, down from a $23.4 billion gain in the prior month, the Federal Reserve said Wednesday. That translates into a 0.4% annual rate in December, down from a 5.7% increase in the prior month.

It is the slowest pace of credit growth since an outright drop in August.

Economists had been expecting a $15 billion increase in consumer credit in December, according to a Wall Street Journal forecast.

Key details: Revolving credit, such as credit cards, slowed to a 1% growth rate after a 16.6% gain in the prior month.

Nonrevolving credit, such as car and student loans, rose a slight 0.2% after a 1.8% rise in the prior month. This category of credit is typically much less volatile. The Fed data do not include mortgage loans, which is the largest category of household debt. 

Big picture: Consumers are starting to feel the pain from borrowing after having paid down balances during the pandemic.

During the fourth quarter, credit-card and car-loan delinquencies were at their highest point in more than a decade, the New York Fed reported earlier this week.

Richmond Fed President Tom Barkin said Wednesday that higher interest payments for consumers and businesses leads him to think the economy will soften later this year.

Market reaction: Stocks

were higher on Wednesday as the S&P 500 index rose close to 5,000. The 10-year Treasury yield
inched down to 4.103%.

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