The report by the Federal Reserve that was released on Monday clearly details that the despite the balances on the credit cards plummeting for the nineteenth month consecutively, consumer debts continued to grow and increased by $1 billion for the month of April.
All aspects of credit in the United States, except for loans on real estate, there was a growth of $1 billion and the debts currently stand at $2.44 trillion. This accounts for an annual growth percentage rate of 0.5%. This the second instance of economic growth being noticed within the last fourteen months.
After reaching the peak in July 2008, the outstanding debts fell by 5.5%. The debts will trend down south if the banks write off uncollectible debts or if the borrowers make payments that go towards the principal amount. In the first quarter of this fiscal year, based on the data made available earlier, the charge off amount stood at $21.6 billion. This is a significant increase as compared to the charge off amount of $12.9 billion in the final quarter of 2009.
MFR Inc`s chief economist, Josh Shapiro, wrote that there is still a long way for the debts in real estate sector to show a comeback. An economist, Gary Bigg, who works for Merill Lynch that is a part of Bank of America mentioned, "High levels of unemployment, tight credit conditions and balance-sheet restructuring will restrain consumer credit in the months ahead"
Marketwatch surveyed a few financial experts and they mentioned that they were looking forward for the consumer debts to increase by $2 billion.
There was a 12% dip noticed in the revolving credit segment that includes the debts on credit cards. The revolving credit came down by $8.5 billion and in the month of April, the figure stood at $838 billion. This was the nineteenth consecutive month that there was a dip noticed in the revolving credit segment.
On the contrary, the non revolving credit segment rose by 7.1%. Personal loans, student loans and auto loans are the ones that come under the non revolving credit segment. In the last 5 months, this is the fourth time that this segment has shown an increase. After peaking two years ago in 2008, there was a dip of 0.4% noticed in the outstanding balances in this segment.
After increasing to $5.3 billion in the month of March, the federal government debts, of which student loans are an integral part, increased by $1.7 billion in the month of April.