US Consumer Credit Jumps to Decade High

U.S. consumer credit soared in July, posting its biggest jump since November 2001, driven in part by demand for auto loans and student borrowings.

Total consumer credit increased $26.01 billion to $3.24 trillion in July, the Federal Reserve said on Monday. June’s consumer credit figure was revised up to show an $18.81 billion increase from $17.26 billion.

Economists polled by Reuters had expected consumer credit to increase $17.35 billion in July.

 
Chris Low, chief economist at FTN Financial, said the credit growth is being driven by auto loans, though he added that signs of loose standards and spikes in default rates are showing.

“The only thing we have to worry about is there is excessive risk-taking in the auto sector,” said Low. “But it’s still a good thing for the economy at least in the short term. Car sales are back to where they were before the financial crisis, which is remarkable.”

The previous record was an increase of around $28 billion recorded in November 2001, according to a Fed spokesman. That occurred shortly after the Sept. 11, 2001 attacks when big automakers were offering zero-percent financing and other incentives to lure consumers back to their showrooms.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza