WASHINGTON—U.S. consumer borrowing rose 4.4 percent in November 2020, its strongest showing in five months, led by strong gains in auto and student loans that offset a drop in credit card borrowing.
The Federal Reserve said Jan. 8 that the rise represented an increase of $15.3 billion, the best showing since June 2020. Borrowing had risen $4.5 billion in October 2020.
Borrowing for autos and student loans increased by $16.1 billion, while borrowing in the category that includes credit cards fell by $786.7 million after a larger $5.5 billion drop in October 2020.
The drop in credit card use was an indication consumers remain cautious about spending amid a spike in coronavirus cases in recent weeks.
Consumer borrowing is closely watched for indications of the willingness of households to take on more debt to support their spending, which accounts for 70 percent of U.S. economic activity.
The Labor Department reported on Jan. 8 that the economy lost 140,000 jobs in December 2020, the first job losses since April 2020 and evidence that the economy is slowing as coronavirus cases surge.
Analysts said that in coming months there are likely to be more job losses.
“A weakening labor market will likely weigh on consumer spending and revolving credit growth in the months immediately ahead,” said Nancy Vanden Houten, senior economist at Oxford Economics. She said that while consumer credit growth is likely to remain sluggish in the early part of this year, she expects credit growth will accelerate in the second half of the year “as a recovery supported by vaccine distribution and more fiscal support takes hold.”
The changes in borrowing left consumer credit at $4.18 trillion in November 2020, up a modest 0.5 percent from a year ago.
The Fed’s monthly consumer credit report doesn’t cover home mortgages or any loans secured by real estate, such as home equity loans.
By Martin Crutsinger