Consumer debt surges $15.4B in November

WASHINGTON – Short-term borrowing by U.S. consumers surged in November to record levels, according to the latest data from the Federal Reserve.
Previous reports by the Commerce Department had shown that consumer spending increased during the holiday season, despite rising energy costs and falling home prices.
The data released late yesterday by the Fed indicate that money came from credit cards, auto loans and other short-term credit. (The Fed report does not include home-equity loans and other borrowing secured by real estate.)
During November, consumer credit increased at an annual rate of 7.4 percent as U.S. consumers added $15.4 billion to their collective tab, pushing total short-term debt to a record $2.51 trillion. Credit growth had slowed over the previous two months, to rates of 2.6 percent in September and 1.0 percent in October.
The overall increase was nearly double the $8 billion mean prediction from a survey of economists by Bloomberg News.
It was led by revolving credit, which increased at an annual rate of 11.25 percent, accelerating from October’s 8.5-percent rate of increase. The average credit-card interest rate in November was 13.08 percent.
Non-revolving debt, such as auto loans, increased at a November rate of 5.0 percent, after shrinking at a rate of 3.5 percent the month before. New-car loans from auto finance companies had an average interest rate of 4.2 percent.
“With job losses mounting, this could be the tip of the iceberg – with consumers needing to rely more on credit cards now that personal income is lagging,” Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi, in New York, told Bloomberg News.
Personal spending rose 1.1 percent in November, while disposable personal income rose only 0.4 percent, the U.S. Bureau of Economic Analysis reported Dec. 21. And after adjustment for inflation, disposable income fell 0.3 percent. (READ MORE.) The National Bankruptcy Research Center last week reported that personal bankruptcy filings rose nearly 40 percent last year, to 801,840 filings nationwide, as credit-card and mortgage debt mounted.
But, said Richard Yamarone, an economist at Argus Research in New York: “It’s difficult to hear the calls of recession when those cash registers are ringing.”
Additional Federal Reserve economic research data, including the full Consumer Credit (G19) statistical release, is available at www.federalreserve.gov.