An increase in consumer borrowing is suggesting that economic conditions are improving and consumer confidence is on the mend. The Federal Reserve published its G.19 release on Consumer Credit – which takes into account charge cards and bad credit personal loans.

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

Initial statistics for the last month of the 4th quarter are an improvement over the 3rd quarter, where overall non-revolving credit increased by 5.4%. 4th quarter borrowing for non-revolving debt was still down, but the 2.8 percentage drop was an improvement over the severe drops experienced during the beginning of the period.

Then again, one should not get their hopes up about an economic transformation just yet. What took the over-all level of consumer lending lower was revolving debt (which includes credit cards and many types of bank loans) dropped 9.4 percent . According to the Federal Reserve stats, non-revolving debt dropped at a growing rate from Jul to Sep. Although banks are lending less these times, they still account for most of the the financing activity. Revolving debt issued by banks totaled $617.1 billion for the period. Finance companies lent out $72.0 billion, while credit unions loaned out $36.3 billion. The gap among the three types of lenders was lower 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 federal government has said the economy was coming out of a recession in 2010, and consumer borrowing information backs up this claim. While credit levels can lead to improved consumer expenditures, this does not necessarily suggest healthy spending. With the unemployment rate hovering near 10%, it makes you wonder if people are using more types of bank loan programs to cover their everyday needs. It is preferred that consumers are taking the dollars to purchase large items (i.e. appliances, tvs, computers and autos) – which would add to more production and good paying jobs. This is a more favorable option than individuals borrowing funds solely to pay for fundamental necessities, which suggest consumers are not in good shape monetarily.

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Filed under: Personal Finance

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