U.S. consumer credit rises for first time in year

Originally Posted on Marketwatch.com.  Click here to view original article.

March 5, 2010, 4:27 p.m. EST
By Greg Robb, MarketWatch


WASHINGTON (MarketWatch) -- In an encouraging sign for the economy, U.S. consumers increased their debt in January for the first time in a year, just the latest hint that household demand may be on an upswing.

Although the economy has picked up steam lately, many economists don't believe it will be on a sustainable path unless consumers restart their spending.

Total seasonally adjusted consumer credit, a measure of total debt taken on by individuals, increased in January $4.96 billion, or at a 2.4% annual rate, to $2.46 trillion, the Federal Reserve reported Friday.

Economists surveyed by MarketWatch expected consumer credit to decline by $6 billion in January.

That marks the first increase in consumer debt since January 2009 and the biggest since July 2008.

Another positive sign came earlier this week when data showed that U.S. chain store sales posted a very strong 3.7% comparable-store gain in February, the strongest reading since November 2007.
 
After the financial crisis deepened in the fall of 2008, the economy fell into recession and consumers stopped spending. As a result, debt levels have declined.

Upbeat on jobs numbers

Tig Gilliam, North America chief for temporary staffing company Adecco, says growth in temporary jobs is good news for the U.S. economy.

On a year-on-year basis, consumer credit is down 4.2%.
The increase in January was led by non-revolving debt, such as auto loans, personal loans and student loans, which rose $6.62 billion or 5%.

Credit-card debt fell $1.67 billion, or 2.4%, to $864.4 billion. That's a record 16th straight monthly drop in credit-card debt.
Not all economists were forecasting a decline.

Ed McKelvey, an economist at Goldman Sachs, said it was hard to square the recent reasonable strength in consumer spending with weakness in income without thinking outstanding credit would start to rise.

"Either that or we need to check for counterfeiting," he wrote in a note to clients.