Consumer Credit Comes Correct in March; Largest Gain in 4 Months

After a couple of months of lukewarm consumer credit growth, U.S. consumers once again commenced to whipping out the plastic in March as credit card spending led a surge in consumer credit for the month, the Federal Reserve said Tuesday.

Total consumer credit -- excluding mortgages -- increased $13.5 billion in March, a gain of 6.7 percent.  This was a marked increase over February’s increase of $5.6 billion.  The total was also the largest surge in consumer credit since November 2006, when consumers spent $20.1 billion on credit.

Revolving credit, like credit cards, saw the largest percentage increase over the prior month.  In March, consumers spent $6.8 billion on credit cards after February saw gains of only $2.2 billion.  Non-revolving credit, such as auto loans, also performed strongly as consumers spent $6.7 billion on fixed loans in March after February’s $3.4 billion gain.

Economists are saying that the credit card sector is now beginning to pick up the slack from other spending sectors, most notably mortgages.

“We've lost a half trillion in mortgage borrowing and consumers are making it up to some extent with credit cards,” said Chris Low, an economist at FTN Financial told Blomberg. ”It looks like income growth is (also) beginning to lose some momentum.”

The sharp increase for March caught analysts off-guard.  Economists polled by Bloomberg and Reuters had expected total consumer credit gains of around $4 billion.