Consumer Credit Surges in March, Defying Expectations

U.S. consumers in March borrowed at the fastest rate in months, defying economists’ expectations. The gains in consumer credit were broad-based, with credit card spending and loans for cars and boats increasing, according to data released late Wednesday by the Federal Reserve.

In its monthly release of consumer credit – referred to as the G.19 report in economic circles – the Fed said that Americans added $15.29 billion to outstanding credit balances, an annual rate of 7.2 percent. This compares to a revised 3.1 percent increase in February. Economists had been expecting a $6 billion total increase in March, for an annual increase of around 3 percent.

Credit card borrowing, called revolving debt in the report, was the leader with consumers adding $6.3 billion to credit card balances, an annual growth rate of 7.9 percent. It was the largest increase in credit card spending since November. Total credit card balances in the U.S. stood at $957.2 billion at the end of March.

Non-revolving credit — such as loans for cars, boats and education – increased $9 billion in March, or at an annual rate of 6.8 percent. March’s increase was the largest for non-revolving credit since August of last year. It increased at an annual rate of only 2 percent in February. Total non-revolving debt balances stood at $1.6 trillion at the end of March.

Total consumer credit outstanding in the U.S. was $2.558 trillion at the end of March, the Fed said. The G.19 report does not include debt secured by real estate.

For the first quarter of 2008, the Fed reported an overall consumer credit increase of an annualized 5.4 percent, up from 4 percent in the fourth quarter of last year. Over the first three months of the year, credit card debt increased at a 6.7 percent annual rate and non-revolving debt increased at a 4.6 percent rate.