A positive sign of Americans believing in the recovery of the economy is the increase in the consumer borrowing noticed in the month of April.
The Federal Reserve, on Monday, said that the borrowing in April increased to $954.8 million. The gain that was reported in the month of March was revised by the government. During March, rather than reporting a gain, it was reported that there was a $5.44 billion decrease in the credit.
If the increase in the month of April holds good, then it will this will only be the second instance of increase in the last fifteen months. Financial experts hope that in the near future many more households will show confidence in borrowing more, thus, helping sustain the growing economy.
January 2010 also saw an increase in the customer credit. However, post that there were significant slumps noticed in the months of February and March. Many people drew a line on their spending habits so they could repay their debts. However, this was followed by an increase in the month of April. The rate of increase in the month of April stood at 0.5%.
There was a significant increase in the non revolving credit segment, which involves auto loans, in April which stood at 7.1%. the various incentives offered by the automobile manufacturers seems to have spurred the increase in the number of loans in this segment.
There was a fall of 12% in the revolving credit segment, which includes borrowing on credit cards. It was the consecutive nineteenth month that saw a fall in this segment. The rebound of this segment may be restricted by the tighter regulations imposed by the federal government on credit card lenders.
Financial experts, in the past, worried about Americans not saving up enough for a rainy day. However, now they fear that the lack of spending may be a bigger cause of worry since it could impact the economic growth adversely. About 70% of the total economic growth is determined by the amount that customers are willing to spend.
Financial experts observed that the small relief that they noticed in the month of April came about three months after repeated downward revisions. They fear that the unemployment rate which is still significantly high and strict rules being levied by the credit card lenders might not help bring about respite any time soon.