WASHINGTON (Reuters) - Consumer credit recorded its smallest increase in eight months in March, a possible hint that Americans are still trying to pare their debts.
Consumer installment credit rose by $7.97 billion to $2.81 trillion, the Federal Reserve said on Tuesday. It was the smallest increase since July and well below economists’ expectations for a $16 billion rise.
For the first quarter, the total flow of credit rose at an annual rate of $157.1 billion, slowing from a $177.7 billion increase in the last three months of 2012.
Revolving credit, which mostly measures credit-card use, fell $1.71 billion after rising $453 million in February. Credit from depository institutions fell in March, while advances by financial institutions were unchanged.
“One sobering statistic that argues against a rebound in household credit growth in the near future is that student loans have been the driver of any growth in credit to households,” said Julia Coronado, chief North America economist at BNP Paribas.
U.S. households built up a massive debt load as the housing bubble expanded. Efforts to pay down those debts have been a restraint on spending and the economy’s recovery.
The drop in credit card usage casts doubt on views that household deleveraging is almost over, as recently suggested by other data that had fueled hopes consumers might soon borrow and spend more freely.
Nonrevolving credit in March, which includes auto loans and student loans made by the government, rose $9.68 billion in March. That followed an $18.18 billion increase in February.
Over the past year, nonrevolving credit from the federal government increased $108 billion, mostly reflecting increased tuition fees.
Some economists, however, were little fazed by the drop in revolving credit and said it still appeared household deleveraging had run its course.
“While the weaker March reading is disappointing, the relatively steady improvement in consumer credit growth over the past year should remain supportive for future consumer spending,” said Gennadiy Goldberg, an economist at TD Securities in New York.
“While there have been concerns that student loans are exclusively been behind the improvement in the credit picture, consumer credit growth ex-student loans remains relatively robust.”
Reporting by Lucia Mutikani; Editing by Leslie Adler