Consumer borrowing rose just $8 billion in March from February to a seasonally adjusted $2.81 trillion, the Federal Reserve said Tuesday. It was the smallest increase in eight months.
The gain was driven entirely by more loans to attend school and buy cars. The category that measures those loans increased $9.7 billion to $19.6 trillion.
A measure of credit card debt fell $1.7 billion to $846 billion. That's 17.2 per cent below the peak of $1.022 trillion set in July 2008.
Since the recession, consumers have been more cautious about using credit cards. Economists believe consumers will stay cautious this year, in part because of an increase in Social Security taxes that has reduced tax-home pay for most Americans.
Cooper Howes, an economist at Barclays, said consumers have been trying to get better control of their debts since the recession hit and he predicted this trend will continue.
While the Fed does not release a breakdown between auto and student loans, Howes said his analysis of the Fed data indicates that almost 80 per cent of the March increase reflected student loans. That would continue a pattern seen in recent years: Americans who lost jobs or recent graduates who can't find work have returned to school and are taking out loans to pay for their education.
According to quarterly data compiled by the Federal Reserve Bank of New York, student loan debt has been the biggest driver of borrowing since the recession ended in June 2009. Student loans reached $966 billion in last year's fourth quarter. That's up from $675 billion in the second quarter of 2009, when the Great Recession was ending.
Consumers increased their spending from January through March at the fastest pace in more than two years. However, they had to trim the pace of their savings to finance the faster spending. Their after-tax income dropped by the largest amount since the final three months of the recession in 2009. Part of the drop in after-tax income reflected the increase in Social Security taxes that took effect on Jan. 1.
A person earning $50,000 a year will have about $1,000 less to spend this year. A household with two highly paid workers will have up to $4,500 less.
Solid hiring could offset some of the drag from the tax increase. The economy added 165,000 jobs in April and hiring in the two previous months was better than previously reported. That helped drive the unemployment rate down to a four-year low of 7.5 per cent in April.
The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.