NEW YORK, NY--(Marketwire -07/11/12)- U.S. consumers spent more on their credit cards in May than any other month since the Great Recession. "We might see additional increases in credit card debt in the coming months," said Paul Edelstein, IHS Global Insight consumer financial economics director. "But they won't match the May surge." Five Star Equities examines the outlook for companies in the Credit Card Industry and provides equity research on Visa Inc. (V) and MasterCard Inc. (MA).
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"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," added Edelstein
According to a report released by the Federal Reserve Monday consumer borrowing increased by $17.1 billion in May. The increase brought the seasonally adjusted borrowing total to $2.57 trillion, just under the all-time high of $2.58 trillion in July of 2008. Credit card debt increased by $8 billion, the largest single month increase since November 2007. Although the gain was quite impressive the total level of credit card debt in May was just 2.2 percent above post-recession lows set in April 2011.
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UBS analyst John Williams earlier this week downgraded Visa and MasterCard to "Sell" from "Neutral". With both companies are trading near all-time highs Williams believes that a decline is inevitable due to the recent slowdown in the global economy. Williams' downgrades came before the Federal Reserve report was released.
"We believe both companies' exposure to a slowing consumer spending backdrop makes a slowdown in key metrics simply unavoidable," Williams wrote in a recent note, he also lowered his price target on both companies.
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