Bloomberg News/Landov
Total credit-card borrowing has only declined in 15 months since December 2011
The numbers: Consumer borrowing picked up in January, according to the Federal Reserve on Thursday. Total consumer credit increased $17 billion in January to a seasonally adjusted $4.03 trillion. That’s an annual growth rate of 5.1%. Economists has been expecting a $16.6 billion gain, according to Econoday. Credit rose a revised $15.4 billion in December, down from the prior estimate of $17 billion.
What happened: Revolving credit, like credit cards, rebounded in January, rising by 2.9% after a 1.1% gain in December. Nonrevolving credit, typically auto and student loans, rose 5.9% in January for the second straight month.
Big picture: Credit growth has been steady, reflecting income growth and consumer optimism.
But there have been recent reports calling into question this tranquil picture. The Fed’s latest Beige Book report found that consumer spending was “mixed” in late January and February, in part due to higher credit costs. And the Fed’s latest senior loan officer survey said that demand for consumer loans was falling while banks were tightening standards on loans. There was also a lot of attention paid to a report that a record 7 million Americans are 90 days or more behind on their auto loan payments.
John Silvia, former chief economist at Wells Fargo, dismisses the doom and gloom. Consumer credit remains “ok for now,” he said in an interview Banks are still willing to make loans and debt-to-service ratios are healthy, he said.
A turning in the credit cycle won’t come until jobless claims start to rise, he added.
“When the economy slows down and jobs start drying up, that’s when you’ll see who is over their skis,” he said.
What are they saying? Ian Shepherdson, chief economist at Pantheon Macroeconomics, said some of the increase in borrowing in January was likely government workers laid off during the partial government shutdown.
Market reaction: Stocks DJIA, -0.93% were lower in late afternoon trading.
