Credit Card Usage Expands for the First Time in 28 Months

Some interesting data out of the Federal Reserve yesterday; while not a number that moves Wall Street consumer credit is interesting for economic wonks.  For the first time in 28 months, credit card debt increased in December - which can be seen as either a positive or a negative depending on your outlook.  One could argue this is due to an increase in confidence, or a return to old bad habits.  The latter would be a concern, specially considering aggregate debt levels in the country have not fallen that much from the peak a few years ago.  It could be a host of unemployed turning to their last source of funds as their 99 weeks of unemployment run out.  Or, since it happened in December, credit cards could just be a way more people funded their gift shopping.  Whatever the case, shorter term it is a boost to an economy that is 70% dependent on consumption - longer term, we'll have to see a few quarters from now if default rates begin to jump again.

Via Reuters:

• Consumer credit surged in December as shoppers boosted their credit-card debt for the first time in more than two years, supporting views economic activity was gathering momentum.  Total credit outstanding climbed $6.1 billion, the Federal Reserve said on Monday, more than twice the $2.3 billion that Wall Street economists surveyed by Reuters had forecast. 
• "It's encouraging that lenders are at least allowing credit card spending to go up, but also it's not great that the only way that extra consumption can be financed is through credit cards rather than hiring income," said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.
• December marks the culmination of the Thanksgiving-through-Christmas shopping season when consumers are more likely to turn to their credit cards for purchases.
• December marked the third successive month in which consumer credit outstanding grew. It had risen by a steep $7.7 billion in October before the November and December gains. Prior to those three increases, consumer credit had contracted for 20 months in a row.
• Strikingly in December, revolving or credit-card debt climbed by $3.5 billion -- the first month in which this category of debt had risen since August 2008.
• Borrowing on auto loans increased 2.8 percent.
• Even with the December gains, consumer borrowing is just 0.7 percent higher than the more than three-year low hit in September. It is 6.6 percent below the high set in July 2008. 
• Even if borrowing rises this year, many economists don't expect Americans will borrow at the pace seen in the middle of the last decade. During that period, soaring home prices made households feel wealthier than they were, and that encouraged them to borrow and spend more.