April 8, 2011 in Business

Consumer borrowing rises

More goes for cars and college
Martin Crutsinger Associated Press
 
Economic reports

• The Labor Department said Thursday the number of people seeking benefits dropped 10,000 to 382,000 in the week ending April 2. That’s the third drop in four weeks.

• Revenue at major retailers rose 2 percent over last March, according to the International Council of Shopping Centers. Many analysts had expected it to be flat or to decline slightly. The figures are based on stores open at least a year.

• Freddie Mac said the average rate on a 30-year fixed mortgage rose to 4.87 percent from 4.86 percent the previous week. The average rate on the 15-year fixed mortgage increased to 4.10 percent from 4.09 percent.

• Oil surged to $110.30 per barrel, reaching a new 30-month high, even though U.S. oil supplies have been increasing. They grew by 2 million barrels last week, according to the Energy Department.

WASHINGTON – U.S. consumers borrowed more money in February to buy new cars and attend school, but they cut back on using their credit cards to make purchases.

Borrowing increased by $7.6 billion, or 3.8 percent, in February, the Federal Reserve said Thursday. It was the fifth consecutive monthly gain.

All of the strength in February came in the category that includes car loans and student loans. That increased 7.7 percent. Borrowing in the category that covers credit cards fell 4.1 percent. That has risen only once in the more than two years since the 2008 financial crisis peaked, a cautionary sign for an economy in which consumer spending drives 70 percent of growth.

Still, Mark Zandi, chief economist at Moody’s Analytics, said it may actually be a good thing that fewer Americans are charging goods on their plastic.

“I think households have done a good job of getting their financial books in order and that will lay the foundation for more prudent borrowing going forward,” Zandi said.

The gains pushed total borrowing up to a seasonally adjusted annual rate of $2.42 trillion in February. That’s 1 percent from the three-year low hit in September.

Households began borrowing less and saving more as they struggled to cope with the severe recession. But economists expect that the period of belt-tightening is ending.

The Fed’s monthly consumer credit report covers auto loans, student loans and credit card financing but excludes loans secured by real estate such as mortgages and home equity loans.

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