U.S. consumers are apparently taking out more loans for vehicle purchases and education as non-revolving debt increased.
According to the Federal Reserve, non-revolving debt, which includes auto loans and student loans, increased by $14.5 billion in August, following a $12.2 gain in July.
It led to overall consumer borrowing expansion of $13.6 billion, which exceeded the economists’ prediction of $12 billion increase. Consumer credit climbed $10.4 billion in the previous month.
American households have more money because of the lucrative stock market and better home values. This enables consumers to avail of cheaper financing products to buy big-ticket purchases like cars.
Further, the August sales of cars and light trucks are at annualized pace of 16 million, the strongest since 2007, data from Ward’s Automotive Group showed.
Ford Motor Co. senior economist Jenny Lin said that interest rates continue to be “very low and favorable” for vehicle purchases.
Meanwhile, student loans rose by $21.9 billion in August after advancing by $4.8 billion in July.
But Americans are also being more careful about taking on more debt by financing other purchases as credit-card debts declined for a third time.
Revolving debt, which includes credit cards, went down by $883 million, following a $1.8 billion fall in July, the Fed’s figures showed. It is the longest string of decline in revolving debt since November 2010.
Gregory Daco, senior economist at Oxford Economics USA, said that people are willing to spend but leery of having insufficient income.