U.S. Consumer Debt Increases $15.3 Billion, More Than Economists Forecast

from Bloomberg:



U.S. Consumer Debt Rises More Than Forecast in March (Update2)

By Vincent Del Giudice

May 7 (Bloomberg) -- U.S. consumer borrowing jumped more than double the amount economists forecast in March, indicating a slowing economy is forcing Americans to accumulate credit-card and other forms of debt.

Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said today in Washington. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans.

Consumers are turning to credit cards after banks tightened standards for home-equity loans and other borrowing. The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession.

``Consumers are strapped as incomes are not keeping up with inflation and this is leading them to rely increasingly on credit to see them through the worst housing downturn since the Great Depression,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York. ``The days of extracting cash from one's home to spend on goods and services are long gone.''

Economists forecast an increase of $6 billion in consumer credit for March, according to the median of 34 estimates in a survey conducted by Bloomberg News.

By category, revolving debt such as credit cards rose $6.3 billion during March and non-revolving debt, including auto loans, increased $9 billion for the month, according to the Fed's statistics.

Household Spending

Total borrowing, a key element of consumer spending, increased at a 7.2 percent annual rate in March after rising at a 3.1 percent pace during February, the Fed said.

Household spending grew at the slowest pace since the 2001 recession in the first quarter, according to Commerce Department statistics. Consumer spending accounts for about two-thirds of economic growth. ......(more)

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