Consumer Borrowing Climbs in November

Toward the end of every year, consumers typically borrow more, particularly on their credit cards. That trend seems to have continued in 2011, and even exceeded analysts’ expectations.

Economists project that consumers increased the amount of money they borrowed both for installment loans and on their credit cards in November, marking another month of increases in consumer credit following more than a year of drops, according to a report from the Associated Press. In all, the amount borrowed by consumers increased $7 billion during the month, down somewhat from the Federal Reserve Board’s data for October, which showed a $7.6 billion increase for that month.

The gains in the previous month were largely the result of consumers borrowing more in nonrevolving debt, or installment loans such as those for education or auto purchases, but not including mortgages, the report said. However, both nonrevolving and revolving debt – the latter being associated with consumers’ credit card balances – increased in November. Card use likely increased largely as a function of consumers getting a head start on the holiday shopping season and taking advantage of more offers from lenders.

Experts say that the continual increases in consumers’ borrowing can also be viewed as continued growth of optimism in the economy, the report said. Indeed, the number of jobs added nationwide topped 200,000 in December, dropping the national unemployment rate to 8.5 percent from November’s 8.7 percent, which itself was a considerable improvement from earlier in the year. Consumers made serious efforts to scale back the amount they were borrowing during and immediately following the recession, when employment concerns and tumbling incomes forced many to fall behind on their payments and have those accounts stricken from lenders’ records.

There has been some debate as to whether the drops in consumer credit – and particularly those for credit cards – were the result of the massive amount of accounts being written off as uncollectable by lenders or if it was a function of consumers simply being more conscientious about keeping a close eye on their spending. The truth is likely somewhere in the middle, as well as a result of lenders significantly boosting borrowing standards and locking out many consumers who might have had easier access to credit in the past.