Consumer borrowing increased at an annual rate of 7.75 percent in the first quarter of 2012, according to Federal Reserve data released today that shows the rate of borrowing soared in March.
Consumer credit grew at an annual rate of 10.2 percent in March, up from an annual rate of 4.4 percent in February, according to the Federal Reserve, the nation’s central bank. Non-revolving debt – which primarily reflects car and student loans – increased at an annual rate of 14.5 percent in the first quarter to more than $1.7 trillion – a five year high.
Revolving debt – reflecting credit card balances fell by 0.1 percent over the same period to $803.6 billion. The five-year low for credit card debt was $792 million in the third quarter of 2011. Total outstanding consumer debt stands at more than $2.5 trillion – approaching a high last seen in 2008.
Despite modest increases in personal income, U.S. auto sales through April have increased 10 percent from a year earlier, according to Automotive News. April’s seasonally adjusted annual sales rate of 14.4 million kept pace with March, the second highest rate since April 2008. An increase in consumer debt has fueled many of these purchases.
Student debt is soaring, as well, exceeding the $1 trillion mark for the first time this year, according to the Consumer Protection Finance Bureau.
Student debt now accounts for the single largest source of consumer borrowing, according to a survey of 990 investors conducted by Millionaire Corner in April. Educational costs are a source of debt for nearly 28 percent of the investors, who represent a range of ages and wealth levels. The youngest investors – those age 40 and younger – are the most likely to have student loans. More than 44 percent identify college costs as a source of debt.
Even a small percentage of investors in their 60s – 9 percent – say education costs contribute to their personal debt levels. Our survey found that 27 percent of these older investors are contributing financial to the education of a grandchild, while more than 8 percent are helping a child with college expenses. Twenty percent say they have “major financial concerns” about the educational expenses of a child, and more than 34 percent, about college costs of a grandchild.
“Student loan growth continues to be very strong and a little worrisome,” Julia Coronado, chief economist for North America at BNP Paribas in New York, told Bloomberg News today. “Smoothing through the monthly volatility consumers are becoming a little more comfortable with borrowing to buy cars.”