Consumer Credit in U.S. Rises on Surge in Non-Revolving Debt

Consumer borrowing in the U.S. rose in December for a fifth straight month as non-revolving credit surged by the most in 11 years.

The $14.6 billion gain followed a revised $15.9 billion advance in November, the Federal Reserve said today in Washington. The median forecast of 30 economists surveyed by Bloomberg called for a $14 billion increase in December. Non-revolving debt, such as financing for college tuition and auto purchases, jumped $18.2 billion in December, while credit-card borrowing fell.

Rising home values and job creation are boosting the ability and willingness of households to borrow, laying the foundation for an acceleration in the consumer spending that makes up 70 percent of the U.S. economy. Cheaper financing is supporting purchases of big-ticket items such as new cars.

“As consumers are willing to take on additional debt, that’s a good sign that economic growth is beginning to turn around,” said Andrew Brodsky, an economist at Stone & McCarthy Research Associates in Princeton, New Jersey, the second-most accurate consumer credit forecaster over the past two years. “The gains are definitely encouraging.”

Estimates in the Bloomberg survey for consumer credit ranged from gains of $9 billion to $20 billion after a previously reported $16 billion advance in November.

Stocks held losses after the figures, with the Standard & Poor’s 500 Index declining 0.3 percent to 1,507.06 at 3:12 p.m. in New York.

The report doesn’t track debt secured by real estate, such as home mortgages and home equity lines of credit.

Non-Revolving Credit

The December increase in non-revolving credit, which followed a $15.3 billion advance in the prior month, was the biggest since November 2001, when automakers lured buyers back to showrooms with zero-percent financing after the Sept. 11 terrorist attacks.

Lending by the federal government, which is mainly for educational loans, increased by $5.5 billion in December before seasonal adjustment, today’s report showed.

Demand for vehicles is helping support economic growth. General Motors Co., Ford Motor Co. and Chrysler Group LLC posted December U.S. vehicle sales gains that exceeded analysts’ estimates, completing a year of growth that helped propel the expansion. Cars and light trucks sold at a 15.3 million annual rate in December after a 15.5 million pace the prior month, according to data from Ward’s Automotive Group.

AutoNation Sales

At AutoNation Inc. fourth-quarter revenue climbed 13 percent from the prior year, boosted by new-vehicle sales.

“Replacement demand, attractive new products and strong consumer credit will continue to support sales and the improving housing market will also support sales,” Chairman and Chief Executive Officer Michael Jackson said on a Jan. 31 earnings call. “The auto retail recovery still has many years to run and I remain as optimistic as ever.”

Revolving debt, which includes credit cards, fell by $3.6 billion, the most since July, after a $573.8 million increase in November.

Labor market gains might be boosting Americans’ willingness to borrow for big-ticket items. Payrolls increased by 157,000 workers in January following a revised 196,000 gain the prior month and a 247,000 jump in November, the Labor Department reported this month.

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