Consumer Credit on the Rise

A recently released Federal Reserve report showed U.S. consumer credit surged to its highest point at 9.9 percent since the post-recovery surge after 9/11 in 2001. It also rose 10 percent on federal government backed issued student loans and higher credit card debt.

The over twenty billion dollar increase is an indicator that consumer lending was supporting the growth of the economy. This amount was nearly three times higher than the median forecast on a poll sponsored by Reuters.

Revolving credit, which mostly involves credit card usage rates, also rose to almost six billion dollars, showing an increase for the third straight month. Revolving credit is any credit that does not have a set or fixed amount of payments in order to repay the loan unlike installment type loans.

The increased growth of credit rates can be a sign of recovery as it shows the consumer’s willingness to spend and an increase of demand on the market. However, without this rate being quantified, it could also be an indicator that individuals who are underemployed or unemployed have to resort to using their credit card to fund necessities. The amassing of increased credit card debt may show itself in next year’s figures.

This increase was the thirteenth instance in fourteen months and the biggest surge since post 9/11 when creditors increased their lending. Non-revolving credit also rose to almost fifteen billion after being seasonally adjusted in November. Non-revolving credit is any credit that cannot be used again after it is repaid, auto and student loans are examples of this type of credit.

Although federal government student loans figures are released in non-seasonally adjusted rates, it would appear based on the information released in the Federal Reserve’s Consumer Credit Report that federal student loan lending also played a significant role in the increase.

Student loans issued by the government rose almost thirty two percent in the twelve month period. This type of loan outperformed all other types of federally tracked non-revolving loans, including those issued by commercial banks. Consumer confidence in obtaining student loans may be due in part to changes in the federal government loan program announced in 2011 by Freddie Mac and Fannie Mae.

The fourth-quarter GDP should also see a rise as consumer credit represents almost seventy percent of GDP figures. Additionally, overall sales in retail rose by a healthier six and a half percent and vehicle sales rose almost nine percent in 2011.