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WASHINGTON, June 7 (Reuters) - U.S. consumers took on $6.25 billion more in debt during April, marking a seventh straight month of increased borrowing as consumers took out loans to buy new cars and pay for schooling while paying down credit-card balances.
Wall Street economists had forecast that April credit would go up by $5.33 billion and had warned in advance that higher borrowing stemmed more from tough economic times than from an economic rebound.
In releasing the data on Tuesday, the Federal Reserve also downwardly revised the figure for March to an increase of $4.82 billion.
“What appears to be a turnaround in the credit cycle is mostly an increase in student loan debt as people go back to school to improve skills amid high unemployment and as state budget cuts push up tuition,” Wells Fargo Securities said.
The Federal Reserve said “revolving credit,” a key category that includes credit card debt, shrank by $943.5 million in April following a $36.7 million increase in March.
The decline indicated that consumers remained wary about incurring debt on their credit cards, especially when prices for food and gasoline were on the rise and pinching disposable incomes.
Government data last month showed that U.S. disposable incomes, when adjusted for inflation, shrank for a second straight month in April as higher gasoline and food prices chewed up income gains and drove consumers to save less.
Because consumer spending drives some 70 percent of national goods and services production, the pressure on spending power acts as significant damper on overall economic activity.
All of the increase in April consumer credit occurred in “nonrevolving credit,” which takes in items like student loans and loans to buy cars.
Nonrevolving credit jumped $7.19 billion after a $4.78 billion March rise.
“The nonrevolving component has increased nine months in a row and is consistent with the strong vehicle sales data we have seen over that period,” said Theresa Chen of Barclays Capital in an email after the data was published.
The Fed provides no breakdown to show what proportion of the increase was in student loans versus auto loans.
The current string of seven monthly rises in overall consumer credit followed 20 straight months in which outstanding credit contracted.
That downward trend had seemed to open a path for consumers to pick up their spending pace since their credit-card balances had been reduced, but the April report implies they were reluctant to incur optional debt when unemployment is high and prices for many items are rising. (Reporting by Glenn Somerville, Editing by Leslie Adler)