In February 2025, US consumer borrowing growth slowed significantly after a near-record increase in January. The total credit increase was $18.1 billion in January, down from a revised $37.1 billion surge in December 2024, according to data from the Federal Reserve. Economists had projected a more modest increase of $14.9 billion, but the actual numbers reflected a deceleration, especially in credit-card debt and non-revolving credit.

Factors Behind the Slowdown

Several key factors have contributed to the slowdown in consumer borrowing:

1. Stubborn inflation and high borrowing costs continue to strain household finances, reducing the ability of consumers to take on new debt.
2. The end of pandemic savings has also taken a toll, as many Americans no longer have the financial cushion they relied on during the height of the pandemic.
3. Rising unemployment and a softening labor market in February further weakened the financial situation of many consumers, making it harder for them to keep up with loan repayments.

Impact on Consumer Debt

In terms of specific debt categories, credit card and other revolving debt climbed by $9 billion in January, while non-revolving credit—such as loans for vehicle purchases and school tuition—also advanced by a similar amount. However, both categories saw a deceleration from the previous month.

Moreover, the delinquency rate on consumer debt has increased, with a growing share of Americans now only able to make the minimum payments on their credit cards. Car owners are also missing their monthly loan payments at the highest rate in more than 30 years, signaling increased financial stress among consumers.

Fed's Role and Future Outlook

Despite these challenges, Federal Reserve policymakers have signaled that they intend to keep interest rates steady until there is more progress in tackling inflation. This presents another hurdle for consumers holding higher balances on credit cards and loans, as the interest rates on these debts will remain elevated.

Concerns and Economic Outlook

The high delinquency rates and the increasing financial strain on US consumers have raised concerns about the health of the broader economy. A record share of consumers is now only making minimum payments, and the delinquency rate on US consumer debt, which hit its highest level in nearly five years at the end of 2024, underscores the growing strain on household finances.

As consumer spending unexpectedly pulled back earlier this year, there is growing uncertainty over the broader economic impact of these trends. The severe winter weather across parts of the country may have influenced these figures, but the overall outlook for consumer borrowing remains a key area of concern as inflation and interest rates continue to put pressure on households.

In conclusion, US consumer borrowing growth has slowed, reflecting broader economic pressures on American households. With the Federal Reserve's focus on inflation and ongoing financial stress, debt delinquencies and reduced borrowing power could continue to impact the US economy in the coming months.