Consumer borrowing increases

Total in March is most in 4 months

Consumers are turning to credit cards as borrowing in the first quarter rose to $34 billion, the most since the first three months of 2001. (Ramin Talaie/Bloomberg News/file 2008)

WASHINGTON - US consumer borrowing jumped more than double the amount economists forecast in March, indicating a slowing economy is forcing Americans to accumulate credit card and other forms of debt.

Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said yesterday. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans.

Consumers are turning to credit cards since banks tightened standards for home-equity loans and other borrowing. The March figures brought consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession.

"Consumers are strapped as incomes are not keeping up with inflation and this is leading them to rely increasingly on credit to see them through the worst housing downturn since the Great Depression," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York. "The days of extracting cash from one's home to spend on goods and services are long gone."

Economists forecast an increase of $6 billion in consumer credit for March, according to the median of 34 estimates in a survey conducted by Bloomberg News.

By category, revolving debt such as credit cards rose $6.3 billion during March and nonrevolving debt, including auto loans, increased $9 billion for the month, according to the Fed's statistics.

Total borrowing, a key element of consumer spending, increased at a 7.2 percent annual rate in March after rising at a 3.1 percent pace during February, the Fed said.

Household spending grew at the slowest pace since the 2001 recession in the first quarter, according to Commerce Department statistics. Consumer spending accounts for about two-thirds of economic growth.

A Fed report two days ago showed the proportion of banks making it tougher for companies and consumers to borrow approached a record in the past three months.

About half of US banks said they tightened terms on existing home-equity loans, mainly because of declines in home values below appraised values, as well as increased defaults and changes in borrowers' finances, according to the Fed's quarterly survey of senior loan officers, released Monday.

"A few years back banks would lend to anyone who could fog a mirror," said Richard Yamarone, chief economist at Argus Research Corp in New York. "Now, banks are reluctant to lend to anyone."

Overdue payments at the six largest US credit card lenders reached the highest since November 2004, according to data compiled by Bloomberg. An average of 4.11 percent of loans were at least 30 days late in February and March, according to reports filed by American Express Co., Bank of America Corp., Capital One Financial Corp., JPMorgan Chase & Co., Citigroup Inc., and Discover Financial Services.