NEW YORK and WASHINGTON (4/8/08)--The nation's consumers pulled back on borrowing in February but remained dependent on credit cards to weather a tough economy. That behavior is typical in a recession, Bill Hampel, chief economist at the Credit Union National Association, told CNNMoney (April 7).
Consumer credit increased by $5.2 billion--or a 2.4% annual rate--to $2.539 trillion during February, said the Federal Reserve Monday. Borrowing was roughly half of January's revised $10.3 billion increase (Economy.com April 7).
But revolving credit, which includes credit cards, rose $4.7 billion--at nearly a 6% annualized rate--to $951.7 billion after a gain in January of 7.1%.
"This is standard consumer behavior in the face of a recession," Hampel told CNNMoney. "When consumers are worried about losing their jobs, they borrow less."
The situation will continue. "The pattern of February will be continued," he said. "What growth there will be, will be in credit card debt."
Also affecting consumer credit is the price of gasoline. "With really high gas prices, people are charging their gas more than they usually do," Hampel said.
Non-revolving credit decelerated further in February with a 0.4% growth at an annual rate, compared with 3.6% in January, said the Fed report. February's growth is the slowest since December and was driven by weak vehicle sales, said Economy.com.
February's year-over-year growth in total credit usage was 5.76%--down from 5.82% in January but still within a narrow range that has prevailed since 2003.
courtesy of cuna.org