According to recent data from the Federal Reserve, consumer borrowing rose from $13 billion in February to $17.5 billion in March. This increase is the highest reported in one month since borrowing grew by $19.3 billion in February 2013.
According to the Federal Reserve, credit card borrowing increased $1.1 billion in March, after a $2.7 billion drop in February. Student loan and auto loan borrowing also increased $16.4 billion in March. The Fed reports that total consumer borrowing in March was estimated at $3.14 trillion.
These are snapshots of a greater trend of Americans increasing their borrowing behaviors over the past year. Banks are showing more of a willingness to give loans to deserving consumers, as job growth and stock-market gains have emboldened consumers to borrow. Non-revolving debt, which includes auto purchases and college tuition, increased $16.4 billion.
In March, auto sales increased from 15.3 million to 16.33 million, the fastest increase since May 2007 according to the Ward’s Automotive Group. The Federal government has also increased its educational loans by $2.6 billion.
Although consumer confidence is growing, domestic banks cite an increase in competition for easing terms and standards on industrial and commercial loans. On bank competition, the Fed said, “smaller numbers of banks also attributed their easing to a more favorable or less uncertain economic outlook and increased tolerance for risk.”
Economists see an increase in consumer borrowing as a sign that consumers have started to believe in the economy again. But they warn that an increase in debt is only a short term solution to long term economic woes. “We are just adding more debt to the balance sheets of American households,” Jay Morelock, an economist with FTN Financial, said to Bloomberg Businessweek. “What would be great is an increase of well-paying jobs that make consumers more credit-worthy.”