Consumer Credit: $20.5 Billion Gain in March

Exceeding expectations for the second month in a row, total consumer credit outstanding increased by 7.4% ($20.5 billion) over the month in March to $3.36 trillion (seasonally adjusted annualized rate. February consumer credit was revised down from a gain of $15.5 billion to $14.8 billion. Over the 12 months ending in March, total consumer debt was up by 6.9%.

 

Non-revolving debt, composed primarily of credit for new automobiles and student loans, increased by 7.9% in March or by $16.2 billion. Over the 12 months ending in March, non-revolving debt was up by 8.2%. Non-revolving debt makes up nearly 75% of total consumer borrowing and during the first quarter, student loans were responsible for most of the growth in non-revolving credit.

It appears American consumers shook off winter’s chill and went shopping in March. Revolving debt (mainly credit cards), rose by 5.9% ($4.3 billion) after contracting by 3.3% in February. Over the year, credit card debt has risen by just 3.3% and is still 13.0% below the peak level reached in July 2008.

Overall, trend growth for consumer credit remains strong.  An expected pickup in consumer spending on discretionary purchases, new vehicles and education through 2015 should fuel additional credit growth. The share of outstanding credit relative to disposable income has risen steadily over the past two years and now stands at 25.3%. The long run average ratio is 22.9%. The increase in consumer borrowing relative to income could be due to consumers feeling more comfortable with taking on additional debt or it may be that low wage growth has pressured some consumers to borrow more to maintain their accustomed level of consumption. 

Source:  http://www.federalreserve.gov/releases/g19/current/default.htm