Consumer Credit in U.S. Increases Less Than Forecast
Consumer borrowing in the U.S. climbed less than projected in March as Americans reduced credit-card purchases for the first time this year.
The $7.97 billion increase followed an $18.6 billion advance the previous month that was the biggest since May 2012, Federal Reserve figures showed today in Washington. The median forecast in a Bloomberg survey called for a $15.6 billion rise. Revolving credit, which includes credit-card spending, fell, while non-revolving borrowing rose.
The tempering of credit-card use coincides with a slowdown in March consumer spending amid higher payroll taxes and limited income growth. At the same time, rising stock prices and home values are enabling households to repair finances, putting them in a position to take advantage of low borrowing costs for purchases such as new cars.
“The month-to-month volatility doesn’t change the picture,” Sam Coffin, an economist for UBS Securities LLC in Stamford, Connecticut, said before today’s report. “Household balance sheets have been improving quite a bit. Gains in home and equity prices are helping.”
Estimates of the 31 economists surveyed by Bloomberg ranged from gains of $11 billion to $20 billion.
Stocks climbed, sending the Standard & Poor’s 500 Index to its fourth-straight record close, on optimism over global central bank stimulus and better-than-estimated corporate earnings. The S&P 500 increased 0.5 percent to 1,625.96 at the close in New York.
Revolving debt, which includes credit cards, decreased by $1.71 billion following a $452.7 million increase.
Personal spending in March rose 0.2 percent after a 0.7 percent gain in the prior month, the Commerce Department said on April 29. Incomes increased 0.2 percent following a 1.1 percent advance.
Non-revolving debt, such as that for college tuition and the purchase of vehicles and mobile homes, increased $9.68 billion, today’s report showed.
Lending to consumers by the federal government, which is mainly for student loans, rose by $3.9 billion before adjusting for seasonal variations.
Americans returning to school are relying on student loans as job opportunities remain restrained. A Labor Department report today showed the number of positions waiting to be filled fell to 3.84 million in March from a revised 3.9 million the prior month that was the most since May 2008. The report also showed hiring decelerated and firings climbed.
Demand for automobiles remains an area of strength for the economy. Cars and light trucks sold at an average 15.3 million annualized rate in the first quarter, the most since the same period in 2008, according to data from Ward’s Automotive Group. In April, vehicle sales cooled to a 14.9 million pace.
“We’re seeing this continued strength of full-size pickup sales, particularly supported by the housing recovery and also the boom in the energy sector,” Jenny Lin, Dearborn, Michigan- based Ford’s senior U.S. economist, said on a May 1 conference call. “The housing sector recovery is in full-swing.”
The Fed’s consumer credit report doesn’t track debt secured by real estate, such as home-equity lines of credit and home mortgages.
Consumer spending, which accounts for about 70 percent of the economy, is being underpinned by the recovery in housing and stock market gains. Residential real-estate prices increased in February by the most since May 2006, with the S&P/Case-Shiller index of property values in 20 cities up 9.3 percent from a year ago.
Consumer wealth is also getting a lift as U.S. stocks are in the fifth year of a bull market amid better-than-estimated corporate earnings and three rounds of bond purchases by the Fed. The S&P 500 (SPX) has advanced 13.4 percent this year through yesterday.
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