Why Are Consumers Borrowing More?

Americans borrowed more than expected in January to spend on education and automobiles, giving the economy a confidence boost.

Consumer credit increased by $17.8 billion to reach the $2.51 trillion mark, according to Federal Reserve figures released Wednesday. Reuters reported that an earlier predictive poll had analysts pegging the growth number closer to the $10 billion mark.

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Most of the increased borrowing was due to non-revolving debt, which includes federal student and auto loans, that saw a spike of $20.7 billion in January, the biggest gain since November 2001. Revolving debt, which includes credit-card based borrowing, dropped by $2.95 billion.

Bloomberg reported a 4.8 percent increase in the sale of cars and light trucks from December to January.

According to Reuters, consumer credit expansion has now been measured for five consecutive months, a sign of growing consumer comfort with debt accumulation and a greater confidence in the economy. Bloomberg’s report also cited a Consumer Comfort Index research pegging consumer confidence to an almost four-year high at the end of February.

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To contact the reporter on this story: Aabha Rathee at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com