Consumers increased their borrowing in March by the largest amount in nearly a year as borrowing on credit cards rebounded following two months of declines.
Consumer borrowing expanded by $20.5 billion to a fresh record of $3.36 trillion, the Federal Reserve reported Thursday. It was the largest increase since a $26.7 billion surge in April 2014.
Borrowing in the category that covers credit cards shot up $4.4 billion to $889.4 billion in March after having fallen in both January and March. It was the biggest gain for consumer credit since last July.
Borrowing in the category that covers auto and student loans rose $16.2 billion to $2.47 trillion.
The overall increase in consumer credit was bigger than economists had been expecting and the February performance was revised higher.
The jump in borrowing on credit cards could be evidence that consumers are beginning to feel more confident about taking on debt to finance retail purchases, a development that should bolster consumer demand in the months ahead. Consumer spending accounts for 70% of economic activity.
Consumer spending growth slowed sharply in the January-March quarter, a big factor in the slowdown in overall growth. The economy eked out a tiny 0.2% increase in gross domestic product in the first quarter.
Economists believe GDP growth will rebound to 2% to 2.5% in the current April-June period and will climb to an even better 3% rate in the second half of the year. But those forecasts are heavily dependent on a solid rebound in consumer spending.
Consumer borrowing in the Fed’s monthly report is up 6.9% from a year ago, a gain heavily influenced by the rise in the auto and student loan category. Growth in the category that covers credit cards has also accelerated in the past year.
The Fed’s monthly credit report does not cover mortgages or other loans backed by real estate such as home equity loans.