U.S. consumer borrowing rose for a fifth straight month in February on an increase in nonrevolving credit as education loans expanded, the Federal Reserve reported Thursday.
Credit climbed $7.62 billion, the most since June 2008, to $2.42 trillion after increasing a revised $4.45 billion in January, the Fed said in Washington. The February figure exceeded the median economist forecast of a $4.7billion increase in the measure of credit-card debt and nonrevolving loans, according to a Bloomberg News survey.
The second consecutive drop in revolving credit, which includes credit cards, indicates Americans remain reluctant to take on more debt even as the economy and job market improve. In addition, rising fuel and food prices are limiting buying power, raising the risk that consumer spending, whichaccounts for about 70 percent of the economy, will cool.
The increase in loans for education shows that “people are going back to school to improve their skills,” said Russell Price, senior economist at Ameriprise Financial Inc. in Detroit. “We expect consumer spending to continue growing. The recovery has the strength to continue.”
The total increase reflected an $8.2 billion nonseasonally adjusted rise, to $349 billion, in the federal government category of borrowing, which includes school loans.
Estimates from 33 economists in the Bloomberg survey ranged from a $2 billion decrease to an $8 billion gain. The revised January reading was lower than the initial figure of $5 billion.
Revolving debt, which includes credit cards, decreased $2.71 billion in February, according to the central bank’s statistics. Nonrevolving debt, including educational loans and borrowing for autos and mobile homes, rose $10.3 billion for the month, the Fed said.
While the Fed’s policysetting Federal Open Market Committee said March 15 that the economy is on a “firmer footing,” New York Fed President William Dudley, the panel’s vice chairman, said April 1 that the U.S. recovery is “still tenuous” and the jobless rate “much too high” at 8.8 percent. The central bank is buying $600 billion in Treasuries through June inan effort to foster growth.
Moody’s Investors Service raised its outlook for the credit-card industry to “stable” from “negative” last month, citing a recovery in card issuers’ “asset quality and profitability in an improved economic environment.”
Discover Financial Services, benefiting from a rebound in its card-lending business, reported a record fiscal first-quarter profit and raised its dividend last month. Its write-offs for loans deemed uncollectible fell to 5.8 percent in February from 9.1 percent a year earlier.
In the auto industry, U.S. vehicle sales rose 6.7 percent in February to an annual rate of 13.4 million, the fastest since August 2009, before slipping in March to 13.1 million. General Motors Co. said sales rose 46 percent in February as discounts and new financing options attracted buyers. Ford Motor Co. and Chrysler Group LLC also reported February gains.
“We continue to believe that the economy is going to continue to stay on its current course of slow but steady recovery,” said Don Johnson, vice president of U.S. sales for General Motors. “With credit availability improving, continuing historically low interest rates and pent-up demand, we continue to believe that consumers are going to be returning to showrooms in even greater numbers this year.”
The Fed’s report doesn’t track debt secured by real estate, such as residential mortgages and home-equity lines of credit.
Business, Pages 23 on 04/08/2011