Consumer Credit in U.S. Climbed More Than Forecast in April

Photographer: Patrick T. Fallon/Bloomberg

Further wage growth would provide households the wherewithal to take out loans for big-ticket purchases such as new cars and help propel higher sales at retailers. Close

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Photographer: Patrick T. Fallon/Bloomberg

Further wage growth would provide households the wherewithal to take out loans for big-ticket purchases such as new cars and help propel higher sales at retailers.

Consumer borrowing in the U.S. rose more than projected in April as Americans boosted credit-card use by the most since November 2007.

The $26.8 billion surge in total credit exceeded the highest estimate in a Bloomberg survey and followed a revised $19.5 billion gain in March, Federal Reserve figures showed today in Washington. Revolving lending, which includes credit cards, jumped $8.8 billion.

More job gains and increases in stock and home values are giving consumers the confidence to borrow after years of paying down debt. The figures underscore a pickup in spending at auto dealers and shopping malls that’s helping the economy rebound from a first-quarter slump.

“The ability of consumers to carry debt is vastly improved,” said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities USA LLC in New York. “This is what we need to see for us to believe that the economy will make that transition to a self-sustaining growth trajectory.”

Employers added 217,000 jobs in May after a 282,000 gain, a report from the Labor Department showed today. It marked the fourth straight month payrolls have increased at least 200,000, the first time that’s happened since September 1999 to January 2000.

The gain in consumer credit was the biggest since a break in the Fed’s series due to changes in methodology in December 2010.

The median forecast of 29 economists called for a $15 billion advance. Estimates ranged from increases of $12 billion to $21 billion after a previously reported $17.5 billion March gain. The report doesn’t track debt secured by real estate, such as mortgages and home-equity lines of credit.

Revolving Credit

The April gain in revolving debt followed a $2.2 billion increase in the previous month, today’s figures showed.

Non-revolving credit, which includes car and school loans, rose $18 billion after climbing $17.3 billion in March. Americans flocked to car dealerships in May, showing loan demand will be sustained.

Cars and light trucks sold at a 16.7 million annualized rate in May, the fastest since February 2007, according to data from Ward’s Automotive Group.

Consumer loans made by the federal government, mostly for school tuitions, increased by $4.8 billion before seasonal adjustment after rising $4 billion in March, today’s report showed.

Faster employment and wage gains would help provide a bigger push for personal consumption, which rose 2.7 percent in April from a year earlier.

Bank Lending

Many banks are showing a greater willingness to extend credit cards and finance car purchases amid growing demand and rising competition, according to a Fed survey of bank senior loan officers at 74 domestic banks and 23 U.S. units of foreign banks from April 1-15.

Every domestic bank that reported easing standards or terms on commercial and industrial loans “cited more-aggressive competition from other banks or non-bank lenders as an important reason for having done so,” the Fed said. “Smaller numbers of banks also attributed their easing to a more favorable or less uncertain economic outlook and increased tolerance for risk.”

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Carlos Torres at ctorres2@bloomberg.net Vince Golle

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