The Fed just released its December borrowing totals. It was a good year for retailers and, by extension, those involved in the credit card business. Revolving credit, which includes credit cards, rose $12.6 billion. This increase comes on the heels of a November decline of $2.9 billion.
As the summary of the fed press release in the Washington Post reports:
The overall December surge was led by a $12.6 billion increase in the category that includes credit cards. It was the biggest one-month gain in credit card debt since a $19.5 billion increase in April 1998.
December’s jump came after a $2.9 billion decline in credit card borrowing in November.
The surge in credit card borrowing in December was another sign that retailers had a good holiday shopping season, although a growing share of those purchases are going to on-line retailers rather than brick-and-mortar stores.
This can raise red flags for some, but the Fed seems less pessimistic than one might think. “Household debt to GDP has been coming down since the financial crisis…it is in a very good place,” said Fed Chairman Jerome Powell at news conference Jan. 29.
While the Fed may be sanguine about the outlook on consumer debt, there are others who may see this increase in debt as a harbinger of something bad in the future. To them I would say, “Give it some time.” This only one data point and we need to look at it relative to many other statistics. Perhaps the most telling will be the rate at which these credit card debts gets paid off.
Overview by Peter Reville, Director, Primary Research Services at Mercator Advisory Group