US Consumers Borrow More In February
Apr 25th, 2011 @ 11:17 AM by Debbie Dragon
According to an article in the Wall Street Journal, a Federal Reserve report states for the fifth month in a row US consumer borrowing was up, rising a total of 3.8 percent to 7.62 billion during the month of February. Economists had predicted a rise but, only of about 5 billion. February’s gain was the largest seen since the economic downfall in 2008.
While the gain is definitely promising, not all the gain is necessarily positive. A good chunk of the lending came in the form of federally funded college student loans, which is not an area that necessarily contributes to economic recovery.
Additionally it is important to note that revolving credit or credit card financing was actually down. Revolving credit saw a decrease, falling another $2.71 billion dollars. While some retailers did report steady sales, the fact credit card use fell shows consumers are being cautious in their spending habits. Since the financial crisis began back in 2008, revolving credit has only gone up once.
The jump in spending can be attributed to other areas of non-revolving credit spending, with car loans being the front runner. Non-revolving credit saw its biggest increase since 2008, rising a total of 7.7 percent or 10.33 billion. Auto sales during the month were up 27 percent from January. Auto makers who were hit particularly hard by the financial crisis seem to be slowly getting themselves back on their feet. According to the article, General Motors who filed for bankruptcy back in 2009, saw its largest profit in more than a decade in 2010 and sales remain strong and steady to date in 2011.
It is important to also keep in mind the report doesn’t take into account home loans and other real estate transactions. The question now remains, will this be enough to stimulate the economy and create more jobs? Probably not. Even though consumers are spending more it is not in areas likely to impact job growth. Additionally, with the rising prices at the gas pump, consumer may become more reluctant to spend in the upcoming months.
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.