$19.3b rise in US consumer credit in December augurs well for economy

Washington: US consumer credit expanded much more than expected in December, a positive signal for the economy as people used their credit cards more and borrowed money to buy cars and go to school.

Total consumer credit grew by $19.3 billion (Dh70.91 billion), more than twice the $7.7 billion increase expected by analysts in a Reuters poll.

Non-revolving credit, which includes auto loans as well as student loans made by the government, accounted for the bulk of the increase as outstanding credit rose $16.55 billion during the month. That was the biggest increase since November 2001, when credit was surging in the wake of the September 11 attacks in New York and Washington.

But revolving credit, which mostly measures credit-card use, also climbed in December. It rose $2.76 billion for its fourth straight monthly gain.

Economists saw the increase as a sign that households were less uneasy over taking on debt as the labour market slowly heals from the 2007-09 recession.

"The recent gains in revolving credit shows increasing confidence on the part of households primarily due to improving labour market conditions," economists at Credit Suisse said in a note to clients.

The US unemployment rate has fallen sharply in recent months but remains well above pre-recession levels. The jobless rate dropped to 8.3 per cent in January, down from 9.1 per cent in August.

JPMorgan economist Daniel Silver said the increase in non-revolving credit might be related to higher auto sales after supply chains were disrupted by an earthquake in Japan in March 2011.