Consumer Debt Increases for First Time in a Year
Although there are signs that things are picking up, many experts believe recent economic growth cannot be sustained without increased spending by consumers. Consumers may be doing just that, thanks in some part to payday lenders.
The Federal Reserve has reported that in January 2010 U.S. consumer debt increased for the first time since January 2009. According to MarketWatch, in January 2010 the total seasonally adjusted debt (a measure of total debt incurred by individuals) rose at an annual rate of 2.4% and increased by $4.96 billion, for a total of $2.46 trillion.
A minority opinion is borne out
Based on a survey of economists, MarketWatch had expected a $6 billion decline in January. Instead, January 2010 marked the largest increase in consumer debt since January 2008. Not all the experts agreed with the forecasted decline and a few even predicted an increase.
According to MarketWatch, Ed McKelvey, an economist for Goldman Sachs believed that weakened incomes combined with recent reports of increased consumer spending could only mean that consumers were purchasing more items on credit. The Federal Reserve report concerning the January 2010 debt increase now bears that out.
Personal loans are the main source of the increase
Non-revolving debt rose by 5% or $6.62 billion to make up the lion’s share of the overall debt increase. Non-revolving debt includes such things as such as auto loans; personal loans including easy cash loans, overnight loans, and other types of internet loans; auto financing; and student loans. Not surprisingly, given all the recent consumer-unfriendly changes concerning credit-card borrowing, such as reduced lines of credit and higher interests rates, credit-card debt decreased. In fact, January 2010 was the 16th consecutive monthly decrease in overall consumer credit-card debt. Credit-card debt dropped by 2.4% for a healthy decrease of $1.67 billion, bringing the national total down to $864.4 billion.