Consumer Credit in U.S. Climbed in April on Non-Revolving Loans

Consumer borrowing in the U.S. accelerated in April as Americans took out more education and automobile loans.

The $11.1 billion increase in credit followed a revised $8.37 billion increase the previous month that was more than initially reported, Federal Reserve figures showed today in Washington. The median forecast in a Bloomberg survey called for a $12.9 billion gain in April.

Higher stock and property values are putting households in a position to take advantage of low interest rates for bigger purchases, such as cars. Credit-card use also rose as Americans contended with higher payroll taxes and limited income growth.

“A lot of what is driving consumer credit right now is non-revolving credit,” Tom Simons, an economist for Jefferies LLC in New York, said before the report. Simons is the second-best forecast of consumer credit over the past two years, according to data compiled by Bloomberg. “The unemployment rate is going to have to fall and earnings are going to have to go up before people are comfortable spending more than they make.”

A Labor Department report earlier today showed wage gains aren’t picking up. Average hourly earnings were little changed at $23.89 in May after $23.88 in the prior month. They were up 2 percent in 12 months ended in May, the same as in April.

Employers last month increased payrolls by a net 175,000 after a revised 149,000 gain in April that was smaller than first estimated. The unemployment rate rose to 7.6 percent from 7.5 percent as more people entered the labor force.

Estimates of the 32 economists surveyed by Bloomberg for consumer credit ranged from gains of $8.5 billion to $17.5 billion.

Non-Revolving Loans

Non-revolving debt, such as that for college tuition and the purchase of vehicles and mobile homes, increased $10.4 billion, today’s report showed.

Lending to consumers by the federal government, which is mainly for student loans, rose by $1.5 billion before adjusting for seasonal variations.

Automobile demand has been a bright spot for the economy. Cars and light trucks sold at an average 15.26 million annualized rate in the first quarter, the strongest since the same period in 2008, according to data from Ward’s Automotive Group. In May, vehicles sold at a 15.24 million pace.

Revolving debt, which includes credit cards, increased by $682.3 million after a $906.4 million decrease. Personal spending in April fell 0.2 percent after a 0.1 percent gain in the prior month, the Commerce Department said on May 31. Incomes were unchanged following a 0.3 percent advance.

Housing Gains

Consumer spending, which accounts for about 70 percent of the economy, is also being underpinned by the recovery in housing. The S&P/Case-Shiller index of property values in 20 cities increased 10.9 percent in the year to March, the biggest 12-month gain since April 2006, a report showed last month.

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

Higher stock prices also provide the wherewithal to increase spending. The U.S. is in the fifth year of a bull market amid better-than-estimated corporate earnings and three rounds of bond purchases by the Fed. The Standard & Poor’s 500 index increased 13.8 percent this year through yesterday.

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