Consumer Credit in U.S. Decreased $11.5 Billion in February:

http://www.bloomberg.com/apps/news?pid=20601087&sid=anX2s9HUAFjg&pos=1

By Vincent Del Giudice

April 7 (Bloomberg) -- Consumer credit in the U.S. declined in February more than anticipated, indicating Americans are reluctant to take on more debt without further improvement in the labor market.

Borrowing fell $11.5 billion, the most in three months, after a revised $10.6 billion January gain that was twice as much as initially estimated, the Federal Reserve said today in Washington. The decline in the February measure of credit card debt and non-revolving loans was worse than the lowest estimate in a Bloomberg News survey of 34 economists.

The drop was the 12th in 13 months and shows consumer purchases, which account for about 70 percent of the economy, will be limited until households become more optimistic about the recovery. Confidence to finance spending may be restored if employment keeps rising after a March payroll gain that was the biggest in three years.

“Consumers are much more cautious about taking on additional credit card debt when jobs are still hard to get and their wealth is still down” from levels before the financial crisis, Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.

Economists expected a $700 million decline in February consumer credit, according to the median estimate of economists in a Bloomberg survey. Projections ranged from a decrease of $10 billion to an increase of $5 billion.

Borrowing in January was revised from a $5 billion gain, the first in a year and reflecting a jump in federal non- revolving loans, such as student loans. Such borrowing increased an unadjusted $13.9 billion in January, previously reported as a $10.3 billion gain.

Credit Cards:

Revolving debt, such as credit cards, declined by $9.4 billion in February, the most in three months, according to the Fed’s statistics. Non-revolving debt, including loans for cars and mobile homes, dropped by $2.1 billion. The Fed’s report doesn’t cover borrowing secured by real estate.

Auto sales in the U.S. slowed in February to a seasonally adjusted annual rate of 10.36 million from 10.8 million a month earlier, according to industry statistics. Snow in the eastern U.S. paralyzed car dealerships and other businesses in cities including Washington and Philadelphia.

The pace of car sales jumped to 11.77 million in March, after Toyota Motor Corp. offered incentives to win back buyers following record vehicle recalls.

Consumer spending rose in February for a fifth straight month, Commerce Department figures showed March 29. Purchases increased 0.3 percent, while incomes were unchanged, reflecting slow job creation.

March Employment:

Employment rose 162,000 last month after falling 14,000 in February, the Labor Department said on April 2. The jobless rate held at 9.7 percent.

Spending is forecast to rise an average 2.25 percent in the first six months of the year after increasing at a 1.6 percent annual rate in the fourth quarter, according to the median estimate in a Bloomberg survey of economists from March 1 to March 10.

As the economy and labor market improves, fewer Americans are falling behind in their credit card payments. Five of the six biggest U.S. credit-card lenders, led by Bank of America Corp. and JPMorgan Chase & Co., said late payments fell or held steady in February as the industry recovered from record losses.

The share of payments at least 30 days overdue, an indicator of future write-offs, dropped to 7.23 percent from January’s 7.35 percent, Charlotte, North Carolina-based Bank of America said. New York-based JPMorgan said late payments dropped to 4.67 percent from 4.75 percent.

In 2009, credit-card write-offs increased 59 percent to $89 billion from $56 billion in the previous year, according to R.K. Hammer Investment Bankers, in Thousand Oaks, California. Write- offs and delinquencies typically track the unemployment rate. The jobless rate has declined since reaching 10.1 percent in October, the highest since 1983.