Due to gas prices rising to close to $4 a gallon in some areas, consumers have chosen to invest in their future by bypassing retail and general spending, and purchasing big-ticket items, such as hybrid vehicles, that will lessen their bills in the future.
And, they’re doing it with credit.
On Monday, the Federal Reserve explained that the nation’s current outstanding consumer debt increased by $5.01 billion. This was way above economists’ predictions that consumers’ debt would raise $3.90 billion.
A survey conducted by USA Today, shows that shopping sites such as Edmunds.com and KBB.com are getting more searches for hybrid and electric vehicles like the Nissan Leaf and the Chevrolet Volt. On Edmunds.com, searches for hybrid vehicles almost doubled to 400,000 from November 2010 to the end of January.
The Toyata Prius, the most popular hybrid, has seen sales increase almost 70% in February, while the Honda Civic had an increase at 53.8%. This data was taken when the average gas price was $2.66, according to Autodata.
Some think that the rise in debt and the purchase of more hybrid vehicles is a sure sign that the economy is improving and consumer confidence in the economy is improving as well. According to Jim O’Sullivan, chief economist at MF Global said in Reuters interview, “Consumers are much less risk averse than they were a year ago and the economy is starting to normalize.”
This year saw sixth straight months of increasing consumer debt for non-revolving credit, which includes items like cars, education, vacations, and boats. Coincidentally, it also demonstrated a 17% increase in growth for U.S. auto sales.
According to Experian, a global information company, data shows that while consumers may have decreased the number of credit cards they use by 23%, they are tending to spend a higher percentage of their credit limit. And, they made these purchases over the holidays which left them with more debt this year. According to data by Experian, at the end of 2010, the average consumer owed $4,200.