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Credit card borrowing falls to its lowest level in 4 years

WASHINGTON (AP) – U.S. borrowing fell for the first time in five months in January as credit card use fell to its lowest level in four years, offsetting car loans and student loans.

The Federal Reserve said on Friday that consumer debt fell by $ 1.3 billion in January, the first decline since the $ 9 billion drop in August.

The weakness came with a $ 9.9 billion drop in credit card debt. It was the fourth consecutive fall in that category, the biggest drop since falling to $ 10.8 billion in August. This reduced credit card activity to its lowest level since January 2017.

The category of car-student loans increased by $ 8.6 billion in the first month of 2021, with a further profit of $ 11.6 billion in December.

Consumer borrowing closely monitors Americans’ willingness to borrow more to finance their spending, which accounts for two-thirds of US economic activity.

Millions of people have lost their jobs since the outbreak a year ago, and households have become more cautious, boosting their savings as a barrier to economic uncertainty.

Nancy Vanden Houten, senior economist at Oxford Economics, says the drop in borrowing reflects consumers’ decision to use the $ 400 stimulus bill in December instead of paying off debt rather than raising costs.

But he predicted that consumer loans would be repaid.

“We expect consumer credit growth to accelerate in the coming months as spending returns to life in response to more fiscal support for the recovering labor market,” he said. He estimated that half of the $ 1.9 trillion bailout package that is on its way to Congress will provide direct assistance to households.

In a separate report, the government said Friday that U.S. employers had added 379,000 jobs in February, the most since October. The increase was seen as a reassuring signal that restaurants and other businesses were boosting their recruitment as viruses declined.

The decline in borrowing in January meant that the Fed report’s total consumer credit was down 0.4% to $ 4.18 trillion. The Fed’s monthly report does not include home mortgages or any other real estate loans, such as home equity loans.

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