Just Like Old Times: Consumer Credit Jumps

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In November, consumer credit rose by the largest amount in a decade, as Americans took out lots of auto and education loans and ran up credit card debt, the Fed said today. Total consumer credit rose by about 10%, or $20.4 billion, the biggest jump since November 2001. Revolving debt, including credit card loans,* rose by $5.6 billion. Non-revolving debt rose by $14.8 billion.

Certainly, there’s a good side to this news: Americans feel more comfortable taking on debt, meaning they might be getting more optimistic.

But there’s also a not-so-happy way to look at the data. Consumers are still getting over the last debt bubble, and had begun to squirrel more money away in their savings accounts. Absent new jobs and higher wages, they appear to be going back to the same old tricks: just put in the credit card!

It also clouds the economic picture in the U.S. If recent economic strength is being boosted by consumers re-leveraging their household balance sheets, then the gains could be tenuous.



Original Article Source by Barrons.com