Research and Statistics

Fed: Card balances rise again


Credit card balances bulged in November for a second month, as consumers’ spending increased faster than their paychecks rose, the Federal Reserve said

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Credit card balances edged upward in November for a second month of growth, the government said, as consumers spent an increase in their paychecks — and then some.

Even when adjusted for the beginning of the holiday shopping season, consumers’ revolving  debt load grew at a 0.6 percent annual pace in November, according to the Federal Reserve G.19 report released Wednesday. In October, the rise was 5.6 percent, revised from an initially reported 6.1 percent surge.

November’s modest rise in card use compares to a sharper 4.8 percent increase in total consumer short-term debt, which includes student loans and financing for cars, boats and mobile homes as well as revolving consumer debt.

“I think in general the trend is positive — spending growth should be picking up as the economy does,” said Scott Hoyt, senior vice president at With delinquency rates low and household budgets getting some breathing room from the expanding economy, lenders should be increasingly willing to make consumer loans, he said. “The fundamentals are in place for a gradual acceleration in borrowing.”

The total consumer short-term debt load according to the G.19 report was $3.09 trillion in November. Of that, revolving debt — made up mostly of credit card balances — was $856.9 billion, compared to $856.4 billion the month before, on a seasonally adjusted basis.

Commercial banks charged average interest rates of 11.85 percent on all credit card accounts in November, the Fed report added. The rate on accounts that were actually assessed interest was 12.89 percent.

Try to remember the days of sequester
The debt rise in November came at a time when households increased their spending at a faster rate than their paychecks rose. Personal income was up 0.2 percent that month and personal consumption expenditures rose 0.5 percent, according to the Commerce Department. Retail sales turned in above-expectation growth of 0.7 percent, a good chunk of it from car lots.

Higher debt would be a concern if the economy was overheating, but most economists say that isn’t the case. With unemployment improving but still high at 7 percent in November, the economy continues to work up a head of steam after the Great Recession, and stronger consumer spending — and borrowing — provides fuel to get the wheels turning.

That’s especially true because the federal government’s belt-tightening continues to hold back economic activity, analysts said, extending the pattern begun in March 2013, with the across-the-board spending cuts known as the sequester.

As federal parsimony continued in November, household income “was held down by flat transfer payments, reflecting cuts in food stamp benefits and the expiration of longer-term unemployment benefits,” among other factors, Regions Bank Chief Economist Richard Moody wrote in an analysis. Federal payments for unemployment fell 2.2 percent in November as benefits began to expire for longer-term jobless, he said. Congress is debating whether to renew its extension of unemployment benefits, which expired at the end of December.

As the year ended, the economy showed increasing signs of health, economists said, with third-quarter gross domestic product topping 4 percent and consumer confidence coming in higher than expected. Consumers’ view of the current position is better than at any time since early 2008, TD Economics said. “As we bid farewell to 2013, the upbeat consumer mood bodes well for spending in 2014,” Senior Economist Michael Dolega said in a research note.

Then came the severe winter storms and unusually cold temperatures that hit most of the nation in early January, which are likely to throw a chill into retail sales and consumer borrowing. With transit systems disrupted by temperatures 25 degrees to 35 degrees lower than normal, lost workdays and higher-than-expected heating bills could squeeze household budgets and crimp spending.

“We’ve seen some anecdotal evidence that grocery stores were doing real well in the days leading up to the storm, as people stocked up,” Hoyt of said.  “But clearly you’re going to have less shopping during the storm.”

Earlier story:Fed: Credit card balances shot up October

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