Consumer credit jumps by $19.3 billion in December

For better and for worse, consumers are starting to take on more debt — much more, surprisingly.

The Federal Reserve reported Tuesday that consumer credit outstanding surged in December at a 9.3% annual rate, thanks mostly to strong car sales and growing demand for student loans.

The seasonally adjusted dollar gain from November was $19.3 billion. That was almost triple what analysts were predicting, and December marked the second straight month of 9%-plus growth.

On the positive side, the increase reflects the pickup in consumer confidence and spending as the labor market has perked up since last summer. Banks, though still highly cautious with credit, are also showing a greater willingness to lend to households.

But the less upbeat part of the story is that consumers also are having to finance more of their pent-up appetites for cars and other products because their incomes haven’t been growing.

Many consumers already have cut their savings, but they’re not likely to keep doing that in this still-shaky economy. So they’ve been pulling out their plastic more to support their stepped-up spending.

Consumers’ credit card and other revolving debt fell sharply after the 2007-09 recession, but over the last few months it’s been growing again. In December, total revolving credit rose by $2.8 billion, up 4.1% from November, after increasing $5.6 billion, or 8.4%, in the prior month, the Fed said.

Should we be worried that credit card balances are rising again?

Not yet, says Alan Levenson, chief economist at mutual fund giant T. Rowe Price in Baltimore.

He pointed out that December’s total revolving credit of $801 billion was still far less than the peak of $972 billion in August 2008.

Looking at another gauge, he said, overall consumer credit of $2.5 trillion was now 21.5% of after-tax income — near the low of the late 1990s.

“We’re still way off the cyclical peak,” he said.

don.lee@latimes.com