Consumer Credit Surges Again, Led by Student, Auto Loans

U.S. consumer borrowing from using credit cards and taking out loans to buy autos and attend college surged again in December, a much bigger jump than expected and a good sign for the economic recovery.
Consumer credit outstanding increased by $19.31 billion in December to nearly $2.5 trillion. That’s a seasonally adjusted annual rate of 9.3 percent, just below November’s jump of 9.9 percent, according to the latest figures from the Federal Reserve.
The December increase was more than twice what analysts forecast, and almost matching November’s equally surprising rise, which marked the biggest monthly jump since the onset of the financial crisis.
The total level of consumer credit represents both revolving balances – credit cards – and non-revolving outstanding debt  – mostly auto loans and student loans. Debt tied to real estate loans are not included in the Fed’s monthly report.
But it was credit for purchasing vehicles and going to school that led the way with an increase of $16.55 billion to $1.697 trillion., an 11.8 percent jump.  Credit card balances rose $2.76 billion to $800.98 billion, a 4.1 percent increase. Both percentages are seasonally adjusted annual rates.
The surges for both November and December represent a turnaround in consumers’ credit spending habits.
For most of the three years since the financial crisis erupted in late 2008, U.S. consumers steadily reduced their outstanding balances as high unemployment persisted and the housing market remained weighed down by foreclosures, stalled new construction and falling home prices.
The housing market has yet to find a bottom, but last weeks jobs report renewed confidence in the financial markets and among economists foreseeing an improving labor outlook.
The Fed, however, said last month that it will hold its benchmark federal funds rate at zero to .25 percent “at least through late 2014,” after citing a U.S. economy that has expanded moderately.

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