WASHINGTON—Borrowing by Americans fell in January for the first time in five months, as the use of credit cards fell to the lowest level in four years, offsetting gains in auto loans and student loans.
The Federal Reserve reported that consumer borrowing fell by $1.3 billion in January, the first decline since a $9-billion decline in August.
The weakness came from a $9.9 billion decline in borrowing in the category that covers credit cards. It marked the fourth straight decline in that category and was the biggest drop since a $10.8 billion fall in August. It pushed credit card activity down to the lowest level since January 2017, the Associated Press stated in its analysis.
The category that covers auto and student loans posted an $8.6-billion increase in the first month of 2021, following an even bigger gain of $11.6 billion in December.
Nancy Vanden Houten, senior economist at Oxford Economics, said she believes the drop in borrowing reflects a decision by consumers to use their $600 stimulus checks from the relief bill passed in December to pay down debt rather than increase spending. But she forecast that consumer borrowing will rebound, the AP said.
Growth to ‘Accelerate’
“We expect growth in consumer credit ... will accelerate in the months ahead as spending springs back to life in response to a healing labor market and more fiscal support,” Houten told the AP.
The drop in borrowing in January meant total consumer credit in the Fed report dipped by 0.4% to $4.18 trillion. The Fed’s monthly report does not cover home mortgages or any other loans backed by real estate such as home equity loans.