US consumer debt rises on more car, school loans

WASHINGTON (AP) - Consumers in the United States took on more debt in November to buy cars and attend school, but stayed cautious with their credit cards.

The Federal Reserve said on Tuesday that consumers increased their borrowing in November by US$16 billion (S$19.6 billion) from October to a seasonally adjusted record of US$2.77 trillion.

Borrowing that covers cars and student loans increased US$15.2 billion. A category that measures credit card debt rose just US$817 million.

The sharp difference in the borrowing gains illustrates a broader trend that began during the Great Recession. Four years ago, Americans carried US$1.03 trillion in credit card debt, an all-time high. In November, that figure was 16.5 per cent lower.

At the same time, student loan debt has increased dramatically. The category that includes car and student loans is 22.8 per cent higher than in July 2008. Many Americans who have lost jobs have gone back to school to get training for new careers.

The November increase also reflected further gains in car sales, which grew 13.4 per cent last year to top 14 million units for the first time in five years. The need to replace vehicles destroyed by Superstorm Sandy may have also contributed to the gain.

Analysts expect the trends in borrowing to stay the same this year. They predict small increases in credit card debt and stronger gains in car and student loans.

Mr Peter Newland, an economist at Barclays Research, said modest growth and a slight easing in credit standards helped boost credit card borrowing slightly last year.

Mr Paul Edelstein, an economist at Global Insight, said consumers seem willing to take on more debt, but slow wage growth and high unemployment should keep many household budgets tight.

The Federal Reserve's borrowing report covers car loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.

The United States economy has been showing signs of improvement.

Consumers boosted their spending in November, helped by lower petrol prices and solid job growth that carried over into last month. Employers added 155,000 jobs last month and 161,000 in November.

Steady hiring may have encouraged consumers to keep borrowing and spending, despite tense negotiations to resolve the fiscal cliff.