Consumer Borrowing Surges Again, Fueled by Auto, Student Loans

Consumer Borrowing Surges Again Fueled by Auto, Student Loans Higher payroll taxes in January did not stop many Americans from buying cars or signing up for student loans, but they may have slowed credit card spending.
Overall consumer credit increased at a seasonally-adjusted annual rate of 7 percent in January, with non-revolving loans paying for vehicles and college tuition bolstering balances, according to the Federal Reserve’s update released today.
All consumer credit — not including real estate loans such as mortgages — jumped $16.2 billion, beating most Wall Street estimates.
That followed a revised $15.1 billion increase in December that was larger than first reported, the Fed said.
Revolving debt, which includes credit cards, rose by $106 million after a $3.2 billion decrease in December.
But non-revolving borrowing jumped 10 percent, a reflection of continuing strong sales of cars and light trucks. Both categories of vehicles sold at a 15.2 million annual rate in January, after 15.3 million a month earlier, according to Ward’s Automotive Group.
The November through February period marked the strongest four months for the auto industry in five years.
But even credit card borrowing will likely see a bounce in February. Victoria’s Secret parent Limited Brands and Costco Wholesale were among several U.S. chains on Thursday to report stronger-than-expected sales for February.
The rebound in consumer spending last month seems to reflect improved economic sentiment, as the housing market expands steadily and the equities market sets new highs.
The Dow Jones Industrial Average climbed to another record high Thursday as the number of Americans who filed for unemployment benefits fell to a six-week low, showing further improvement in the labor market.

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