An increase in consumer borrowing is suggesting that economic conditions are improving and consumer confidence is on the mend. The Federal Reserve released its G.19 release on Consumer Credit – which also includes bank cards and bad credit personal loans.

The annual rate of total non-revolving consumer credit increased by 3.0% in December to an entire level of $2.41 trillion. Non-revolving credit, which includes auto loans and college loans, rose 2.8 per cent during the period. Even revolving debt (i.e. credit cards) was on the mend – experiencing a 3.5 percent jump during the holiday shopping season.

Preliminary figures for the last month of the Fourth Qtr. are an improvement over the 3rd Qtr., where total non-revolving credit rose by 5.4%. Fourth quarter credit for non-revolving debt was still down, but the 2.8% drop was an improvement over the severe drops experienced during the beginning of the period.

But, one should not get their hopes up about an economic recovery just yet. What moved the overall level of consumer borrowing lower was revolving credit (which includes credit cards and many types of bank loans) dropped 9.4 percentage . According to the Federal Reserve statistics, non-revolving debt fell at a growing rate from Jul to Sep. Although banks are lending less these days, they still account for a large amount of the the lending activity. Revolving debt made by banks totaled $617.1 billion for the period. Finance companies loaned out $72.0 billion, while credit unions loaned out $36.3 billion. The gap among the three types of lenders was less when it came to non-revolving loans. Commercial banks lent out $483.7 billion – still in the lead. However, finance companies loaned out $447.0 billion and credit unions loaned out $191.1 billion.

The govt has professed the economy was exiting from a recession in 2010, and consumer borrowing figures helps this claim. While credit levels can lead to extra consumer expenditures, this does not necessarily suggest healthy spending. With the unemployment rate hovering close to 10%, it makes you wonder if people are using more types of bank loan programs to satisfy their every day needs. It is hoped that individuals are using the money to purchase durable goods (like appliances, tvs, laptops and autos) – which is likely to add to more manufacturing and high paying careers. This is a far better option than individuals borrowing funds just to pay for ordinary essentials, which suggest people are not in good shape fiscally.

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