Increase in credit card debt for the second time since financial crisis
Credit card debt has increased for the second time since the flare-up of the financial crisis and consumers are now giving hope that there is a boost in the economy. There seems to be some recovery in the economy as consumer spending has gone up.
The overall consumer credit outstanding has gone up to $2.426 trillion from $6.02 billion, as per the monthly report on borrowing, stated the Federal Reserve. This increase, which is the 6th in a row, has been larger than expected. A forecast had been made by the Economists who were surveyed by Dow Jones Newswires, had forecast a $4.8 billion increase in consumer debt during the month of March.
These gains seem to have come amidst mixed signals with regard to the strength of the US economy. For example, as per the government data the payrolls in the private sector have grown the most since the last five years but the same report goes to show that unemployment rates have risen to 9.0%.
During the month of April, the US service sector activity has slowed down to the weakest since the summer of last year. This had been stated by the Institute for Supply Management on Wednesday.
While the warehouse club Costco Wholesale Corp had posted a 12% increase in sales despite being shut down for Easter, the reports on April chain-store sales were strong.
However, the higher fuel costs had contributed to the increase which could be due to the gas stations that are operated by Costco at all the sites.
Now Americans have to shell out more at the fuel pumps and due to this, they are cutting down on their spending in other areas. During the first 3 months, the economy had braked sharply and this was partially due to decreased consumer spending.
Revolving credit or credit card debt has risen from $1.95 billion to $796.10 billion during March. This has happened only on two occasions in 31 months or twice since September 2008. This was when the financial crisis flared and this led to lenders writing off balances that were overdue and consumers ended up paying down debts.
According to the Fed non-revolving credit has climbed from $4.07 billion to $1.629 trillion and this category includes loans on tuition, mobile homes, cars etc.
However, the consumer credit report does not include loans secured through real estate or home mortgages. The data gives an insight into consumer spending patterns.
