After nearly 12 months straight of declines in consumer borrowing, it finally increased in January, the Federal Reserve reported on Friday. Rather than decreasing as economists predicted, total consumer borrowing (which includes loans and credit cards) rose a seasonally adjusted $5 billion, which equals an annual rate of 2.5 percent. Overall, borrowing sat at $2.456 trillion in January.
Economists Predicted a Decline
Briefing.com surveyed economists regarding their predictions on consumer borrowing for the month of January. Most predicted a decline of $4.5 billion in January. The increase of $5 billion was an unexpected turn of events.
However, some analysts say that people should take this news with a grain of salt since consensus estimates are generally way off on consumer credit numbers.
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Consumers Still Forgoing Credit
It seems that the recent trend in borrowing has shown that lenders and creditors are willing to give a little bit more than they had in the past year. However, consumers still seem to be moving away from the idea of taking on new credit cards. In fact, recent reports show that revolving credit fell in January by a 2.3 percent annual rate.
It’s possible that the new credit card reform that went into effect Feb. 22, 2010 could have an effect on consumers’ decisions to take on new credit. With new protections lined up, consumers may once again feel safe without worry about high credit card rates.