Consumers Start Borrowing More

The Federal Reserve releases its report on consumer credit with a one-month lag, but there may finally be some good news for the economy here on this front. March saw a $20.5 billion seasonally adjusted gain in consumer credit. This was nearly a 7.4% gain, the largest since last July.

Total debt grew by $20.5 billion to a total of $3.36 trillion in March. While Dow Jones was calling for a $16 billion gain, this is not generally a market-moving number. What stood out here is that the borrowing gains were universal — credit card balances, education and cars, all rose:

  • Credit cards, measured by revolving credit, rose 5.9% for the first gain of 2015.
  • Non-revolving credit, which is considered to be auto loans and student loans, rose by 7.9%.
  • While this non-revolving gain was smaller than the prior month, it is now a four-year gain.

What this points to, at least a hope in the matter, is that it sets the stage for slightly better spending in the second quarter. If so, then that barely positive GDP report in the first quarter may not represent another huge disappointment for the second-quarter GDP. With an increase in the jobs market, this at least points a bit toward higher economic readings.

It would not be advisable to go buy or sell any of the markets based upon a consumer credit report with such a delay, but this is at least one pointer that maybe things were not as bad in the first-quarter GDP report as many economists and business owners may have feared.

If you really want to put this in perspective: the $3.34 trillion in consumer credit in March compares to a 2010 year-end reading of $2.64 trillion in consumer credit. That is just a lot more credit, some 26% more, that is used to buy things in the economy.

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