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Credit Card Lending Predicted to Grow 6 Percent; Turner Urges Patience with Economy
Friday, May 9, 2014 6:55 AM

Americans added to their credit-card tabs in March after a cautious start to the year, a sign that consumer spending is accelerating heading into the spring, reports The Wall Street Journal.

The amount of outstanding revolving credit, mostly credit-card debt, rose at a seasonally adjusted annual rate of 1.6 percent, to $856.68 billion, a Federal Reserve reported. The gain comes after credit-card debt contracted at a 3.8 percent rate the prior month.

The rising debt load suggests shoppers are confident enough in their job and income prospects to extend themselves in order to make additional purchases. Still, the amount revolving credit outstanding shrunk during the first quarter of 2014, reflecting in part unusually cold weather that slowed purchases of consumer goods.

Overall consumer credit, including student and car loans but excluding real-estate loans like mortgages, increased by $17.53 billion in March, or at a 6.7 percent annual rate. Non-revolving debt, led by consistent demand for student loans, has outpaced growth in credit-card debt during most of the nearly five-year-old economic recovery.

The amount of student loans issued by the federal government rose by $2.6 billion in March, on a non-seasonally adjusted basis. Federal student lending rose by $113.1 billion, or 18 percent, last year.

Revolving debt increased at a much slower pace, rising 1.3 percent last year. Credit-card debt peaked during the recession at $1.02 trillion, before declining sharply early in the recovery. Revolving debt has mostly expanded since 2011, but remains well below the 2008 peak.

According to Brian Turner, director and chief strategist with Catalyst Strategic Services, credit unions’ market share of consumer loans has been improving, reaching 8.7 percent in March. This compares with 8.6 percent at the end of 2013. However, Turner points out that this pales in comparison to 2009’s peak of 9.3 percent.

“Since 2009, the credit union’s market share of non-revolving credit has fallen from 12.3 percent to 9.9 percent,” Turner tells the Leaguer. “Most of the industry’s loan growth continues to be carried by large credit unions which control 67 percent of industry assets but account for only 6 percent of the total number of credit unions. This seems to explain the lack of improvement in market share over the past three years in particular despite the improvement in industry loan growth.”

Although Turner sees The Wall Street Journal’s news report as encouraging, he doesn’t believe it is cause for celebration just yet.

“We continue to have a long way to go for broader-based improvement in performance that will only come when the employment sector improves enough to stimulate consumer spending behavior,” he tells the Leaguer. “That’s going to take a while. But good news will be right around the corner. We just need to be patient.”