The Federal Reserve said Monday that total borrowing rose at an annual rate of $5 billion in January, or 2.5 percent, the fourth consecutive gain. Strong car sales drove the increase. The category that includes auto loans rose 6.9 percent.
Credit card debt fell 6.4 percent in January, the 28th decline in 29 months. Americans increased their use of plastic in December for the first time since the financial crisis. But they cut back in January, even though a Social Security tax cut is giving most households an additional $1,000 to $2,000 this year.
Combined, total consumer credit equaled $2.41 trillion, a slight 0.7 percent above a three-year low hit in September. Consumer borrowing is 6.6 percent below the high reached in July 2008.
Analysts predict that consumers will borrow more in the months ahead, responding to the strengthening economy, a brighter outlook for jobs and the tax cut. The government reported Friday that the unemployment rate fell to 8.9 percent in February, the first time it had been below 9 percent in nearly two years.
Households began borrowing less and saving more as they struggled to cope with the deep recession that began in 2007. People trimmed their spending, which accounts for 70 percent of total economic activity, when the jobless rate began to rise.
The rise in auto loans was the sixth consecutive month of increases, reflecting a rebound in auto sales.
Even if economists’ forecasts are accurate and borrowing increases this year, analysts are not predicting that consumers will increase debt the way they did during the housing boom.
During that time, households felt wealthier because of soaring home values. But when home prices fell, they cut back on borrowing. The trend accelerated after job losses mounted and many people struggled to get their debt under control.
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