Despite wintry weather, U.S. consumer borrowing in February blew past economists’ expectations with an increase of $15.5 billion, thanks to a big jump in non-credit-card loans, according to a monthly report from the Federal Reserve released on Tuesday (April 7).
But revolving credit-card debt fell by $3.7 billion, the second monthly decline in a row after a $1 billion drop in January.
The February rise in total credit followed a $10.8 billion gain in January, which was lower than the $11.6 billion the Fed originally reported. Even taking that into account, consumer borrowing was much stronger than expected. Economists surveyed before the numbers were released on Tuesday estimated that February borrowing rose only $12.1 billion, The Wall Street Journal reported. Another group of 31 economists surveyed by Bloomberg had an average estimate of $12.5 billion, with individual estimates ranging from $5.5 billion to $16 billion.
What likely blindsided the economists was non-revolving credit, such as auto and education borrowing, which climbed by $19.2 billion in February after an $11.8 billion gain in January.
The big February increase may have been influenced by a turnaround in auto-loan interest rates. Rates on 48-month new-car loans from commercial banks were down to 4.06 percent in the last quarter of 2014 after declining annually from more than 6 percent in 2010. But in February, that rate bounced back to 4.53 percent, which may have spurred some car buyers to borrow before rates went even higher. Despite that, February auto sales fell by the most in more than a year according to an earlier Commerce Department report.
Federal lending to consumers, which mostly consists of student loans, rose a modest $6.4 billion after a big jump of $27.9 billion in January.
While economists may have been overly pessimistic about overall consumer borrowing in February, they’re still waiting for consumers to pull out their plastic again. But according to the Associated Press, “economists are hopeful that with healthy job growth and unemployment down to 5.5 percent, households will feel more confident about using their credit cards.”