Americans cut their credit card debt slightly in January, as
winter storms and expiring unemployment benefits contracted the
openhanded spending of the month before.
Revolving debt fell at a seasonally adjusted annual pace of 0.3
percent in January, according to the Federal Reserve's preliminary
G.19 Consumer Credit
The shrinking debt load reversed course from a revised 4.3
percent increase in December. The Fed had initially estimated
December's revolving debt load
leaped at a 7 percent rate, even after adjusting for seasonal
January's pullback came despite stronger-than-expected consumer
spending. The 0.4 percent gain in
personal consumption expenditures
during the month was four times analysts' consensus estimate.
However, "a lot of the strength in consumer spending came from
utility spending," said Scott Hoyt, senior director at Moody's
Analytics. "I don't think a lot of that shows up on credit cards."
Spending on services, which includes utilities, saw its biggest
monthly gain since mid-1998, as furnaces battled colder-than-usual
temperatures in much of the nation, analysts said. Retail sales,
which exclude utilities, moved the opposite direction in January,
falling 0.4 percent.
The Fed's measure of total short-term consumer debt rose 5.3
percent, including car loans and student loans as well as revolving
debt. Households had $3.1 trillion in short-term debt, of
which $856.2 billion is revolving debt -- chiefly credit card
Since Jan. 1, about 1.8 million Americans have stopped receiving
monthly unemployment checks, after Congress decided not to renew
the emergency extension of benefits, according to TD Economics. The
resulting 25 percent drop in unemployment payments "was the
largest monthly decline in recorded history," economist Thomas
Feltmate said in a research note.
"That definitely contributed to the weakness in sales and
consumer spending," Hoyt said. "That money goes to folks who are
going to spend it right away."
The cutoff of benefits probably reduced credit card use by some
households and increased it by others, Hoyt said. Although a drop
in income would normally cause a drop in spending and card use,
"maybe if you've got to buy the food somehow, you put it on cards,"
Hoyt said. "You can make a case either way."
In the longer run, returning health in the job market is making
household budgets stronger. Businesses and government added 175,000
jobs in February, more than analysts had predicted, the government
announced Friday. Active job seekers pushed the
up fractionally to 6.7 percent, from 6.6 percent, but the
economists called the growth in jobs encouraging. A year ago the
jobless rate was 7.7 percent.
Families are gradually getting their financial footing after the
Great Recession of and the period of slow growth that
followed, economists say. Lower debts, combined with rising incomes
and a rebound in home values, have put households on their
strongest financial foundation since the early 1980s, Federal
Reserve Bank of New York Research Director James McAndrews said in
"The key development behind the firmer tone of consumer spending
over the second half of 2013," he said, "is the significant
strengthening in household balance sheets."
Appetites for debt vary widely by city, according to an
analysis by the credit bureau Equifax
. Consumer debt, including mortgages, leaped 5.9 percent in Houston
during 2013, while at the other end of the spectrum
Miami-Fort Lauderdale saw a 3.3 percent decline, Equifax found.
Houston also had the largest gain for credit card debt, up
4.53 percent, while Detroit posted the smallest gain, at 0.37
Household debt rise marks a 'turning point'