(Reuters) - Consumer credit expanded in May by the most in five months as Americans used their credit cards more readily, offering hope household spending will help the sputtering economy.
Consumer credit grew by $17.12 billion in May, the Federal Reserve said on Monday. That was well above the $8.5 billion increase Wall Street economists had forecast in a Reuters poll.
The Fed also said credit rose more during April than originally thought.
The data follows a report on Friday that showed employers hired at a dismal pace in June, a sign Europe's debt crisis was shifting the economy into low gear. Most economists think economic growth slowed in the second quarter, when the pace of hiring fell off dramatically.
The credit data from May suggests consumers are gaining some confidence after a long stretch in the doldrums.
"If sustained, this dynamic would be positive news for consumer spending as a whole and, ultimately, for job creation," said Dana Saporta, an economist at Credit Suisse in New York.
Revolving credit, which includes credit cards, grew by $8.01 billion. That was the biggest gain since November 2007, which was the eve of the 2007-2009 recession. Consumers paid down revolving credit during the recession and only started using it more around mid-2011.
Non-revolving credit, which includes car and student loans, increased by $9.10 billion in May.
Consumer credit flows - a relatively new data series that the Fed says is more sensitive to economic trends - also picked up. The flow of consumer credit rose to an annual rate of $205.4 billion in May from $119.4 billion in April.
Still, credit data can be tricky to interpret because running up debts is not always a sign of optimism. People might turn to credit cards because they are not making enough money.
"It is possible ... that households are relying more and more on credit cards to cover everyday expenses, given that job and income growth are so weak," said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.
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