Thursday, March 8, 2012

Consumer credit rises more than expected in January

WASHINGTON (Reuters) - Consumer credit expanded sharply in January in a generally positive sign for the economy as people borrowed money to buy cars and go to school, Federal Reserve data showed on Wednesday.

But at the same time, the report also pointed to a decline in credit card usage, which could point to some jitters among consumers regarding their outlook for earnings.

Total consumer credit grew by $17.776 billion in January, which was above the $10.0 billion increase that was expected by analysts in a Reuters poll.

Credit has now expanded for five straight months, which economists see as a sign households are less uneasy about taking on debt as the labor market slowly heals from the 2007-2009 recession.

"An expansion in consumer credit signals improved confidence in the economy and an enhanced willingness to spend," said Paul Edelstein, an analyst at IHS Global Insight.

Nonrevolving credit, which includes auto loans as well as student loans made by the government, rose $20.723 billion during the month. That was the biggest increase in dollar terms since November 2001, when credit was surging in the wake of the September 11 attacks in New York and Washington.

The U.S. unemployment rate has fallen sharply in recent months but remains well above pre-recession levels. The jobless rate dropped to 8.3 percent in January, down from 9.1 percent in August.

But household incomes are posting less impressive gains. After-tax incomes adjusted for inflation fell in January for the second time in three months, the Commerce Department said last week.

The Fed data on Wednesday showed borrowing via lines of revolving credit, which mostly measures credit-card use, fell in January for the first time in five months. It was down $2.947 billion compared to December.

"Households remain reluctant to use credit cards and that has contributed to the slower growth rate in consumer spending over the recovery," Nomura economist Ellen Zentner said in a note to clients.

Also tempering the optimism of the overall increase in consumer credit, the Fed revised downward its estimate for December's measure of total credit growth by about $3 billion.

(Reporting by Jason Lange; Editing by Andrea Ricci)

Source: http://news.yahoo.com/consumer-credit-rises-more-expected-january-200645922.html

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