Consumer credit surges by most since 2001

WASHINGTON Mon Jan 9, 2012 6:35pm EST

A customer carries shopping bags at South Park mall in Charlotte, North Carolina November 25, 2011.  REUTERS/Chris Keane

A customer carries shopping bags at South Park mall in Charlotte, North Carolina November 25, 2011.

Credit: Reuters/Chris Keane

WASHINGTON (Reuters) - Consumer credit surged 10 percent in November, its biggest jump in a decade in a positive signal for the economy as consumers tapped their credit cards and the government doled out more student loans.

Outstanding consumer credit increased to $20.37 billion during the month, the Federal Reserve said on Monday. That was the biggest gain since November 2001 and nearly three times the median forecast in a Reuters poll.

Revolving credit, which mostly measures credit-card use, rose $5.60 billion, a third straight monthly increase.

"Credit growth is a positive sign for the recovery in that it signals increasing demand and willingness to spend," said Paul Edelstein, an economist at IHS Global Insight in Lexington, Massachusetts.

Edelstein said, however, that there was a risk the credit growth could be a sign that chronic unemployment was leading more people to turn to credit to fund necessary expenditures.

The government said late last month that consumer spending edged up just 0.2 percent in November, with households cutting back on their saving.

JPMorgan economist Daniel Silver said the increase in credit card borrowing might have been aided by some big banks imposing new fees on debit card use. It "may have pushed people to favor credit cards over debit cards," he said.

The increase in consumer credit was the 13th in 14 months and the biggest jump since creditors boosted lending in the wake of the September 11, 2001, attacks in New York and Washington.

Nonrevolving credit, which includes student and auto loans, rose a seasonally adjusted $14.78 billion in November.

Government lending to students appeared to be a significant factor in the increase, rising $6.4 billion. Unlike the broader credit gauges, the student lending data is not adjusted for seasonal fluctuations.

Over the 12 months through November, government loans to students rose 31.9 percent, outperforming any other kind of non-revolving loans tracked by the Fed, including those made by commercial banks.

However, there are some signs the surge in student lending registered since the last recession is tapering off. Year-over-year increases in student lending peaked at 78 percent in September 2010 and have trended lower since then.

(Reporting by Jason Lange; Editing by Kenneth Barry and Leslie Adler)

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Comments (2)
chapapet wrote:
PARADOX – does this word work for this type of news…

so who will pay their bills on time, who will pay their mortgage on-time, whoever spent this money on whatever endeavor can they pay it back…

I rather see less spending on all fronts to make me confortable that another person or persons has NOT gone beyond their means…

good news for the economy , retail businesses, me, you…please expain to me what am I missing; a surge in consumer confidence, less umemployment as a result of the best spending since 2001…

I am baffled!

Jan 09, 2012 4:03pm EST  --  Report as abuse
Gorm wrote:
School is a convenient parking place for the unemployed!
Unfortunately, between schools and government, too many graduate with unmarketable degrees and tens of thousands in debt.
We are too short sighted!!
Many of these schools should be prohibited from offering “financed” degrees. It is akin to offering apprenticeships in buggy whip construction.

Jan 10, 2012 11:54am EST  --  Report as abuse
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