The numbers: Consumer borrowing decelerated again in January, according to Federal Reserve data released Friday, suggesting to some economists that Americans are using the latest stimulus checks to pay down debt.
Total consumer credit decreased $1.3 billion In January, the Fed said. That’s an annual decline at a 0.4% rate, and follows a 2.5% gain in the prior month.
Economists has been expecting a $12 billion gain in January, according to a survey by the Wall Street Journal.
What happened: Revolving credit, like credit cards, dropped 12.2% in January after 3.4% decline in the prior month. It’s the fourth straight decline in revolving credit and tenth drop in the past eleven months.
Nonrevolving credit, typically auto and student loans, grew at a slower pace, rising 3.2% after a 4.4% gain in the prior month. This category of credit is much less volatile. It only fell briefly at the start of the pandemic before returning to steady growth.
The Fed’s data does not include mortgage loans, which is the largest category of household debt.
Big picture: Revolving credit had a record annual pace of contraction in 2020, noted economists at Oxford Economics.
Economists expect credit growth to accelerate later this year as the economy reopens and consumer spending rebounds.
What are they saying? “We assume that some people have used their $600 stimulus payments to pay down debt,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Market reaction: U.S. stocks were trading sharply higher in a volatile session after the February jobs report was released by the Labor Department. The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.61% was up 534 points in the last hour of trading.