ECONOMY

Consumer spending surges in April

 

Associated Press

Consumers increased their borrowing by a sizable amount in April, with growth in credit card debt rising at the fastest pace in more than 12 years.

Overall credit expanded by $26.8 billion during the month, up from a gain of $19.5 billion in March, the Federal Reserve said Friday. The strong climb is an encouraging sign for the economy, suggesting that consumers are confident enough to boost purchases by borrowing.

The result was fueled by autos and student loans, which rose by $18 billion, and credit card debt, which was up $8.8 billion. The upswing in credit card debt represented a 12.3 percent gain, the fastest pace since November 2001 when consumers were being urged to spend to bolster the economy following the September 11 terrorist attacks.

Increased household borrowing can fuel stronger consumer spending, which accounts for 70 percent of economic activity in the U.S.

The rise in credit card spending was surprising given recent trends. Credit card use plunged during the recession when consumers tried to lower their debt as millions of people lost their jobs.

Credit cards started to rebound in 2011. But those increases have lagged far behind the category that covers auto and student loans, with consumers still apprehensive about taking on high-interest debt. Even with the big April jump, credit card borrowing is up only 2.2 percent over the past year.

By contrast, the student and auto loan category has advanced at a more rapid 8.2 percent over the past year, nearly four times the pace of gains in credit card borrowing.

A separate quarterly report on consumer credit from the Federal Reserve Bank of New York shows that student loans have been the biggest driver of consumer borrowing since the recession ended in June 2009.

The sharp rise has triggered concerns about the impact on young people trying to start careers and families while saddled with debt.

Deputy Treasury Secretary Sarah Bloom Raskin, who has made student debt one of her top priorities, met with economists this week to discuss the issue. Raskin said afterward that her goal is to “ensure that student loan debt levels do not threaten” economic activity in other areas.

Read more Economy & Banking stories from the Miami Herald

Miami Herald

Join the
Discussion

The Miami Herald is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere on the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

The Miami Herald uses Facebook's commenting system. You need to log in with a Facebook account in order to comment. If you have questions about commenting with your Facebook account, click here.

Have a news tip? You can send it anonymously. Click here to send us your tip - or - consider joining the Public Insight Network and become a source for The Miami Herald and el Nuevo Herald.

Hide Comments

This affects comments on all stories.

Cancel OK

  • Marketplace

Today's Circulars

  • Quick Job Search

Enter Keyword(s) Enter City Select a State Select a Category