U.S. consumer debt balloons to a record $1.653 trillion.
Debt jumped by record $19.9 billion in November
MSNBC STAFF AND WIRE REPORTS
Jan. 8 — U.S. consumers increased their borrowing by a record amount in November, thanks mainly to zero-percent financing offers from auto manufacturers. The Federal Reserve reported Tuesday that debt levels ballooned by $19.9 billion to a seasonally adjusted $1.653 trillion.
THE DOLLAR INCREASE was the biggest since the Fed began record-keeping in January 1943. On a percentage basis, the 14.6-percent increase was the largest since November 1995.
The jump was also on top of a revised $11.2 billion gain in October. The previous month had originally been reported as a smaller $7.0 billion advance.
“It’s apparent consumers haven’t been too concerned with softer economic conditions and a weak labor market,” said economist Richard Yamarone of Argus Research Corp. “Without the burden of high energy prices and lofty mortgage rates, consumers felt comfortable to borrow briskly.”
Economists were expecting consumer borrowing to rise, but by a lot less — around $3 billion to $4 billion during the month.
While consumer confidence rebounded in December, it was down sharply in November. The nation’s unemployment rate shot up to 5.6 percent in November and layoffs also rose.
The increase was led by so-called nonrevolving debt, closed-end loans for things such as autos, boats or educational expenses. More than half of nonrevolving credit consists of auto loans. The nonrevolving sector rose by $14.4 billion in November, after a $14.7 billion rise in October.
The report shows the Federal Reserve’s campaign of lower interest rates, which began in January 2001, may be paying dividends in the form of increased economic activity. New car loan rates had moved lower during the year but dropped sharply after the Sept. 11 attacks as automakers lured hesitant car buyers by offering no-interest loans.
Americans used their credit cards much more freely in November than during the previous month.
Demand for revolving credit, such as that used for credit cards, rose by $5.4 billion, or at an annual rate of 9.4 percent in November. That compared with a drop of $3.5 billion and a rate of decline of 6.1 percent in October.
The Fed’s report on consumers includes credit card debt and loans for autos, boats and mobile homes. It does not include loans backed by real estate, such as home mortgages or increasingly popular home equity loans. |
