Consumer Borrowing in U.S. Rose More Than Forecast in February

Consumer credit in the U.S. climbed more than forecast in February as Americans took out more loans for motor vehicle purchases and education.

The $18.1 billion increase was the biggest in six months and followed a revised $12.7 billion advance in January, the Federal Reserve said today in Washington. The median forecast in a Bloomberg survey called for a $15 billion gain. Non-revolving debt, which includes financing for autos and college tuition, surged by $17.6 billion, the most since at least 2006.

Higher stock prices this year and increasing home values have helped households mend their balance sheets, making them more amenable to borrowing. At the same time, another report today showed the share of younger Americans in the labor force is declining amid limited job opportunities, which may explain the sustained increases in loans for secondary education.

“The drop in the participation rate has been centered in younger workers, many of whom have given up hope of finding a decent job and are instead continuing in school and racking up enormous amounts of student debt,” Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. in New York, said in an e-mail to clients. That “has contributed to the recent surge in consumer credit outstanding.”

Estimates in the Bloomberg survey for consumer credit ranged from gains of $8.9 billion to $17.6 billion after a previously reported $16.2 billion advance in January.

Earlier, figures from the Labor Department showed employers hired fewer workers than forecast in March and unemployment dropped as people left the labor force. The jobless rate declined to a four-year low of 7.6 percent.

Payroll Gain

Payrolls grew by 88,000 workers, the smallest increase in nine months and less than the most-pessimistic forecast in a Bloomberg survey, after a revised 268,000 February advance. The median forecast of 87 economists called for a 190,000 gain.

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

Revolving debt, which includes credit cards, rose by $532.8 million after a $1.65 billion increase in January.

The February gain in non-revolving credit followed an $11.1 billion increase in the prior month.

Lending by the federal government, which is mainly for educational loans, rose $4.2 billion in February before seasonal adjustment, today’s report showed. The increase may reflect more Americans returning to school because of limited job opportunities.

Participation Rate

The Labor Department’s report today showed the share of the working-age population in the labor force, known as the participation rate, fell to 63.3 percent, the lowest since May 1979. The average number of hours worked for all employees increased in March, while earnings stagnated. The participation rate among those 20 years old to 24 years old fell to a seven-month low.

At the same time, lower interest rates are helping spark sales of motor vehicles. Cars and light trucks sold at a 15.3 million annual rate in February after 15.2 million pace a month earlier, according to data from Ward’s Automotive Group.

Purchases ran at a 15.2 million rate in March. General Motors Co. reported its best March in five years after selling 245,950 vehicles, and announced a third consecutive month of higher retail and total market share.

“The only negative real headwinds we see are higher taxes and potentially lower government spending,” Kurt McNeil, vice president of U.S. sales operations for GM, said on an April 2 conference call. “Everything else seems to be pretty positive; jobs, housing which we have been talking about for a while, availability of consumer credit, autos, stock market performance obviously is helping and then fuel price stability is also a positive.”

Fuel Costs

Gas prices have declined since reaching a high this year in February. The average cost of a gallon was $3.63 yesterday compared with $3.79 on Feb. 26, according to AAA, the nation’s largest motoring group.

Homeowners are also enjoying stability in the values of their properties. Home prices rose 10.2 percent in the 12 months through February, and 1.7 million homeowners returned to positive equity in 2012, according to Irvine, California-based CoreLogic Inc.

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