WASHINGTON – U.S. consumers borrowed at a modest pace in February for the second month in a row, evidence of ongoing caution that has kept a lid on spending this year.
Borrowing rose at a 5.8 percent annual rate, the Federal Reserve said Thursday, just above January’s 5 percent pace. January’s climb was the smallest in more than two years. The use of revolving credit – mostly credit cards – rose just 3.7 percent after slipping in January. Total outstanding credit increased $17.2 billion to $3.57 trillion.
Americans barely increased their spending in February for the third straight month. More hiring and cheaper gas may have also reduced some consumers’ need for credit cards.
Economists are closely watching consumer behavior, as their spending has emerged as a key source of growth this year. Weak overseas economies have weighed on U.S. exports, widening the trade deficit. Business investment has been lackluster and U.S. manufacturing is struggling in the face of a stronger dollar, which has made U.S. goods more expensive overseas.
Yet so far this year, consumers have been reluctant to ramp up spending. That has prompted many economists to lower their estimates for growth in the first three months of this year to an annual rate of 1 percent or below. That would follow a tepid 1.4 percent growth rate in the final three months of last year.
Analysts expect consumer spending to pick up later this year and boost the economy. Businesses have continued to hire at a solid pace, suggesting they remain generally confident about the economy’s outlook.
The borrowing figures include student and auto loans, as well as credit card debt. They exclude housing-related debt such as mortgages and home equity lines of credit, and other housing-related debt.
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