October marked the third month in a row that consumer credit rose, a promising sign for the economy. The Federal Reserve reported a gain of $14.2 billion in consumer credit in October. That’s higher than the $10 to $20 billion uptick predicted by Wall Street economists.
Consumer credit is a strong indicator of consumer confidence. Higher confidence equals increased spending, and figures show all types of lending are up. Revolving credit, including credit card debt, increased by 4.75% to $858 billion. Non-revolving credit, such as car loans and student loans, was up by 6.86% to the tune of $1.9 trillion.
Student loans on the rise
The demand for student loans continues, with a $6.9 billion rise in student lending in October. Department of Education loans have been steadily rising since 2008 when many downsized employees returned to the classroom in search of new career paths. Student loans now total $516.4 billion and will likely continue to grow, especially since the interest rate on new student loans backed by the government was frozen at 3.4% last June.
Auto and student loans are part of the non-revolving debt category, which has increased 22% from the summer 2008 pre-economic crisis.
Holiday spending forecast
Following the economic crisis in 2008, credit card use took a steep dive, but those numbers are slowly recovering. Before 2008 U.S. consumers held $1.03 trillion in credit card debt. October’s figures are 17% lower than that record high.
Concerns over the so-called “fiscal cliff” may also be affecting consumers’ buying habits. The “cliff” is the name economists have given to tax increases and spending cuts anticipated in January if the president and Congress are unable to come to an agreement on the federal budget.