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Consumer Credit Grew Sharply In May

Despite signs that spending slowed in May, consumers were borrowing at a still-strong pace.

Americans expanded their debt burdens in May at the fastest rate since January, the government said Monday, suggesting that higher financing costs for everything from credit cards to mortgages have done little to deter the American consumer from borrowing and spending.

Consumer credit

grew by a seasonally adjusted $11.8 billion in May, according to the

Federal Reserve

, bringing the annualized growth rate to 9.8%. In April, consumer credit had grown at a revised $8.8 billion, or 7.4% annual pace.

The sharp growth in credit came even as other economic signs suggested that consumer activity was slowing in May. For example, retail sales took a 0.3%

dive in May, largely due to falling sales for items that are typically financed, such as autos and big-ticket items like appliances. Additionally, businesses hired fewer workers in May, causing the unemployment rate to jump to 4.1% in May from 3.9% in April. (Unemployment ticked back down to 4.0% in June.)

The fastest rate of consumer credit built up in May came from so-called non-revolving credit, which includes debt for a one-time use such as a car loan or a student loan. Non-revolving credit grew 10.5%, or $7.1 billion, in May, after growing at a much slower 3.4%, or $816.2 billion, pace.

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Revolving credit, which includes reusable lines such as credit cards and accounts for the majority of consumer debt, grew 8.9%, or $626.6 billion, following a 12.7%, or $622 billion, rise in April.

The still-high rate of consumer credit could be a sign that American consumers, who are responsible for about two-thirds of the nation's economic growth, are continuing to borrow and spend, even following six interest rate increases by the Federal Reserve in the past year.

In theory, higher interest rates slow demand by making it more costly for consumers and businesses to borrow and spend, decreasing the risk of inflation. Some areas of the economy, such as

retail sales,

home sales and

consumer confidence, have gotten weaker in recent months, presumably due to higher rates. But other measures, such as bulging consumer credit, a May rebound in

factory orders and the continued upward momentum in

worker salaries are likely to continue worrying policymakers.

The Fed has raised rates six times in the past year, but held rates steady at its most recent meeting on June 28, citing "tentative and preliminary" signs of an economic slowdown.