Bloomberg News

Consumer Credit in U.S. Climbed in April for Seventh Month

June 07, 2011

(Updates with economist comment in fourth paragraph and markets in fifth.)

June 7 (Bloomberg) -- U.S. consumer borrowing rose in April for a seventh consecutive month, led by a gain in non-revolving debt, including auto and student loans, the Federal Reserve reported today.

Credit rose by $6.25 billion after a revised $4.82 billion gain in March that was smaller than the previous estimate, the Fed said in Washington. Economists projected a $5 billion increase in, according to a Bloomberg News survey.

The increase in borrowing from commercial banks and credit unions in April probably reflected growing demand for autos that has since dropped off as fuel prices climbed. Concern over rising unemployment may have also caused households to cut credit card balances, showing consumer spending remained constrained.

“The gains were driven by non-revolving charges in April, but this was before $4 gasoline at the pump took a bite out of car and SUV sales in May,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. “The consumer is still leery about running up charge-card balances after the greatest financial crisis since the Great Depression.”

Stocks recovered today after the Standard & Poor’s 500 Index’s valuation fell yesterday to the lowest level of the year and concern over Europe’s debt crisis eased. The S&P 500 index climbed 0.5 percent to 1,291.95 at 3:22 p.m. in New York. Treasury securities were little changed.

The median forecast was based on a survey of 37 economists. Estimates ranged from increases to $2 billion to $7 billion.

Revolving Debt

Revolving debt, which includes credit cards, decreased by $944 million in April after increasing $37 million the prior month, according to the central bank’s data. Revolving debt dropped for 27 consecutive months from September 2008 to November 2010.

Non-revolving debt, including educational loans and loans for autos and mobile homes, rose $7.19 billion for the month. The Fed’s report doesn’t track debt secured by real estate, such as home equity lines of credit.

Consumer spending, which accounts for about 70 percent of economic activity, rose a less-than-forecast 0.4 percent in April, according to Commerce Department statistics released May 27, as the cost of staples like food and fuel increased.

In the auto industry, General Motors Co.’s U.S. deliveries exceeded analysts’ estimates in April as increasing demand for fuel-efficient models pushed the industry’s annual sales rate above 13 million for the third straight month. Ford Motor Co. also reported a gain as did foreign vehicle makers.

Auto Sales

Demand dropped to an 11.8 million pace last month, in part reflecting a lack of inventory as the earthquake and tsunami in Japan disrupted vehicle production.

Target Corp., the second-largest U.S. discount retailer, reported a decline in first-quarter gross margin as rising gas prices curbed demand while Target’s credit-card business performed better than expected. “In the retail segment, driving sales continues to be our biggest challenge and number one priority,” Gregg Steinhafel, chief executive officer of Minneapolis-based Target, said May 18.

Consumers paid more for gasoline and other petroleum products. On the New York Mercantile Exchange, crude oil prices rose as high as $113.93 a barrel on April 29, the most in 2 1/2 years. Prices have since retreated and remain about 40 percent higher than a year ago.

Households have also had to contend with elevated food prices. Food costs are projected to rise 3 percent to 4 percent this year, the most since 2008, according to a May 25 report from the Department of Agriculture.

--Editor: Carlos Torres

To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net


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