U.S. Consumer Debt Rose $15.4 Billion in November

By Vincent Del Giudice, Bloomberg.net

Jan. 8 (Bloomberg) -- U.S. consumer borrowing rose more than forecast in November as Americans used credit cards and auto loans to add to a record amount of debt, Federal Reserve statistics showed.

Consumer credit increased $15.4 billion for the month to $2.51 trillion, the Fed said today in Washington. In October, credit rose $2 billion, less than the previously reported gain of $4.7 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans.

The figures suggest Americans are relying more on credit cards and other short-term borrowing to maintain spending after the collapse in sub-prime lending made bank loans harder to get. An increase of 133,000 U.S. jobs in November and December was the lowest for those two months since 2002 and disposable incomes aren't keeping pace with inflation.

``With job losses mounting, this could be the tip of the iceberg with consumers needing to rely more on credit cards now that personal income is lagging,'' said Chris Rupkey, an economist at Bank of Tokyo-Mitsubishi, in New York.

The report explains how consumer spending, which accounts for two-thirds of the economy, strengthened at the start of the holiday shopping season. Commerce Department figures released Dec. 21 showed U.S. personal spending rose 1.1 percent in November after a 0.4 percent increase in October.

Economists expected consumer credit to rise by $8 billion during November, according to the median of estimates in a Bloomberg News survey.

In today's report, the Fed said credit increased at a 7.5 percent annual rate in November after rising at a 1 percent pace during October. Revolving debt such as credit cards rose $8.8 billion and non-revolving debt, including auto loans, was up $6.7 billion, the Fed reported.

Disposable income, or the money left over after taxes, decreased for a second straight month in November after adjusting for inflation, according to a Commerce Department report on Dec. 21.

Statistics released Jan. 3 showed personal bankruptcy filings rose almost 40 percent last year as consumers struggled to pay credit-card debt and home mortgages. Individual filings climbed to 801,840 compared with 573,203 in 2006, according to the National Bankruptcy Research Center.

The Fed's Open Market Committee next meets on interest rates on Jan. 29 and Jan. 30, and many economists anticipate the central bank will again lower its benchmark lending rate to prevent a recession. Unemployment rose to 5 percent in December, the highest in two years.

``It's difficult to hear the calls of recession when those cash registers are ringing,'' said Richard Yamarone, an economist at Argus Research in New York.

The Fed lowered the rate by a quarter percentage point to 4.25 percent at its Dec. 11 meeting -- the third consecutive reduction. Commercial banks, in turn, lowered their prime lending rate to 7.25 percent from 7.5 percent.