Consumer borrowing unexpectedly surges in March

Wed May 7, 2008 3:01 PM EDT

WASHINGTON — Consumer borrowing rose in March at the fastest pace in four months, more than double the increase of the previous month, in what was seen as a sign of rising economic stress.

The Federal Reserve reported Wednesday that consumers increased their borrowing at an annual rate of 7.2 percent, compared with a 3.1 percent rate of increase in February.

The gain was much larger than economists had been expecting and reflected strong borrowing on credit cards and also in the category that includes auto loans. The increase in consumer debt totaled $15.3 billion at an annual rate in March, much bigger than the $6 billion increase that economists had been expecting.

Economists said consumers were being forced to make greater use of their credit cards during hard economic times when they are being battered by job losses, soaring gasoline prices and higher food costs.

"This represents distressed borrowing. Consumers need cash and they have turned back to their credit cards to fill the void left by lost jobs and weaker incomes," said Mark Zandi, chief economist at Moody's Economy.com.

Borrowing on credit cards was up at an annual rate of 7.9 percent, compared to a 5 percent gain in February, while borrowing in the category that includes auto loans jumped by 6.8 percent, compared to a 2 percent increase in February.

The overall growth in debt of 7.2 percent at an annual rate was the biggest gain since an increase of 8.25 percent last November.

Consumers have been moving to put more of their purchases on their credit cards as banks have tightened lending standards for home equity loans in response to the deepening credit crisis.

The Fed's measure of consumer borrowing, which does not include any debt secured by real estate such as mortgages or home equity loans, stood at a record $2.558 trillion in March.

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{"commentId":1776428,"authorDomain":"uspolitics"}

Kathy Gill

Why is this a surprise? The cost of everything is going up and most folks don't have budgets with huge amounts of disposable income that can "shrink" to meet the gap.

My guess is that a lot of that borrowing is on gasoline station credit cards.

{"commentId":1776428,"threadId":"261174","contentId":"1474570","authorDomain":"uspolitics"}

#1 - Wed May 7, 2008 3:30 PM EDT

{"commentId":1778481,"authorDomain":"james-pitman"}

SGT Pitman

I am sure that is part of it, but look at everything in the store, it is all going up.
I know if most people are like me, they are looking at a new more fuel efficient car, I am part of the spike, I just got a new car with double the old mileage.

{"commentId":1778481,"threadId":"261174","contentId":"1474570","authorDomain":"james-pitman"}

#2 - Thu May 8, 2008 8:38 AM EDT

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Consumer borrowing unexpectedly surges in March

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