U.S. consumer credit unexpectedly shrank, with credit card lending posting the largest decline since 2024.

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US consumer lending unexpectedly declined, marking the first drop since 2024, mainly dragged down by a decrease in revolving credit.

Data released by the Federal Reserve on Wednesday showed that consumer credit balances decreased by about $182 million in May, following significant increases in the previous two months. The median forecast of economists surveyed by Bloomberg was for a increase of $17.5 billion.

The decline was mainly due to a $5.3 billion decrease in credit card and other revolving credit balances, the largest drop since 2024. Meanwhile, non-revolving credit (such as auto loans, education loans, etc.) increased by $5.1 billion. The report does not include mortgage loans.

Although the recent oil price shock caused by the Iran war has pushed up energy prices, especially gasoline prices, US household consumption has remained resilient in recent months. This data suggests that, after consumer lending saw the largest two-month increase in over three years, US consumers are now starting to pay off some debts.

The recent decline in gas station prices has begun to boost consumer confidence and is expected to further ease household financial pressures in the coming months. However, overall living costs are expected to remain high in the short term, and inflation in many industries is still rising faster than wage growth.

For US consumers holding unpaid credit card balances, high credit card interest rates remain a heavy financial burden. As of May, the average interest rate on credit card accounts accruing interest reached 22.15%. In addition, as investors bet that the Federal Reserve may raise rates this year, borrowers are unlikely to see relief in financing costs in the short term.

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