U.S. consumers sharply increased their use of credit cards in March, pushing up total borrowing at the fastest pace in 15 years.
The Federal Reserve reported that total consumer borrowing rose $29.7 billion in March, a 10% jump from the previous month. It was the largest percentage gain since a surge of 18.4% in November 2001, when consumer borrowing surged in response to government officials urging Americans to boost spending to support the economy following the September terrorist attacks.
Total borrowing rose to a fresh record of $3.59 trillion. Borrowing in the category that includes credit cards jumped $11.1 billion, or 14.2%, the biggest one-month gain in the category since July 2000. Borrowing for auto and student loans rose $18.6 billion, up 8.5%.
The overall increase of $29.7 billion tied the dollar rise in November 2001. Both are the largest dollar rises on record.
Matt Freeman, credit card products manager at Navy Federal Credit Union, said consumers ramped up revolving credit in March after paying down card balances accumulated through the holiday spending months. February is typically the lowest month for credit card spending, he said.
Still, the borrowing surge in March surprised economists, who had forecasted a more moderate gain of $15.6 billion, based on earlier reports that consumer spending barely moved in March. Consumer spending for the first three months of the year grew at a slower pace than the fourth quarter. This slowdown has held back overall growth, which increased at an annual rate of just 0.5% in the first quarter, the slowest pace in two years.
The sharp increase in consumer borrowing follows months of modest economic growth. While the economy has been producing jobs at a healthy pace, overall economic activity has slowed. But economists believe continued steady gains in hiring will boost spending in the coming months and help growth to accelerate.
Measures of U.S. consumer confidence have reflected uncertainty in recent weeks. The University of Michigan's final consumer-sentiment index declined in April to its lowest mark in seven months. The closely watched gauge of consumer sentiment, released last week, was 89.0, down from March’s final reading of 91.0 and the lowest level since September.
A separate gauge of U.S. household attitudes, the Conference Board’s consumer confidence index, dipped in April to 94.2 from 96.1 in March, the group reported last week. That report showed slightly fewer people saying that they planned to take a vacation or buy a car, home or major household appliance within the next six months.
In yet another report Friday, the Labor Department said U.S. employers added 160,000 jobs in April, while the unemployment rate remained at a low 5%.