Consumers increased their borrowing in March by the largest amount in nearly a year as borrowing on credit cards rebounded after two months of declines.
Consumer borrowing expanded by $20.5 billion in March to a record of $3.36 trillion, the Federal Reserve reported Thursday. It was the largest increase since April 2014.
Non-revolving debt, mostly auto and student loans, grew at a 7.9% rate in March, rising $16.2 billion to $2.47 trillion. Credit card debt increased at a 5.9% rate in March, up $4.4 billion to $889.4 billion. It marked the biggest increase in credit card loans since last July. The jump in borrowing on credit cards could be evidence that consumers are starting to feel more confident about taking on debt to finance retail purchases, a development that should bolster consumer demand in the months ahead. Consumer spending accounts for 70% of economic activity. The gains in both revolving and non-revolving borrowing might set the stage for slightly better spending in the second quarter. Economists believe GDP growth will rebound to 2% to 2.5% in the current April-June period and then climb to an even better 3% rate in the second half of the year. Those forecasts are heavily dependent on a solid rebound in consumer spending.The Fed's monthly credit report does not cover mortgages or other loans backed by real estate such as home equity loans.