WASHINGTON U.S. consumer credit soared in July, posting its biggest jump since November 2001, driven in part by demand for auto loans and student borrowings.
Total consumer credit increased $26.01 billion to $3.24 trillion in July, the Federal Reserve said on Monday. June's consumer credit figure was revised up to show an $18.81 billion increase from $17.26 billion.
Economists polled by Reuters had expected consumer credit to increase $17.35 billion in July.
Chris Low, chief economist at FTN Financial, said the credit growth is being driven by auto loans, though he added that signs of loose standards and spikes in default rates are showing.
"The only thing we have to worry about is there is excessive risk-taking in the auto sector," said Low. "But it's still a good thing for the economy at least in the short term. Car sales are back to where they were before the financial crisis, which is remarkable."
The previous record was an increase of around $28 billion recorded in November 2001, according to a Fed spokesman. That occurred shortly after the Sept. 11, 2001 attacks when big automakers were offering zero-percent financing and other incentives to lure consumers back to their showrooms.
Revolving credit, which mostly measures credit-card use, increased $5.34 billion to $880.5 billion, after an upwardly revised $1.81 billion increase in June.
Non-revolving credit, which includes auto loans as well as student loans made by the government, increased $20.65 billion in July to $2.36 trillion after an upwardly revised $16.99 billion increase in June.
"People are feeling more comfortable in their jobs, and more comfortable with the economy," said Matt Schulz, senior industry analyst at CreditCards.com, who pointed to auto loans and student lending as driving the growth.
"Too many times, we see people spend amounts of money they can't afford," Schulz said. "But people seem to be feeling more confident, and if they can afford the spending, then that's great for the economy."
(Reporting by Michael Flaherty; Additional reporting by Richard Leong in New York; Editing by Andrea Ricci)