Car loans drive consumer credit increase

Car loans drive consumer credit increaseThe month of April saw the seventh straight increase in consumer credit, driven mainly by high demand for auto loans, according to the latest report from the Federal Reserve.

Analysts have tracked seven consecutive months of a rise in credit usage across the nation, although the numbers don't tell the whole story. True, credit usage increased by $6.25 billion in April, but as with previous months, the gains were mainly because of auto loans.

Credit card usage, referred to as "revolving debt," was actually down in the month of April by $943 million. That means that "non-revolving debt," which includes auto loans, student loans and more, was forced to pick up the slack, rising $7.19 billion. That was a big jump after growing $4.78 billion in March.

Economic analysts tend to see credit usage as a positive sign, showing that Americans are spending again. Yet while the auto loan gains are good for the economy, consumers are still a bit wary about racking up bills on their credit cards.

"The gains were driven by non-revolving charges in April, but this was before $4 gasoline at the pump took a bite out of car and SUV sales in May," Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, told Bloomberg. "The consumer is still leery about running up charge-card balances after the greatest financial crisis since the Great Depression."

It remains to be seen if the demand for car financing will remain high in May, but the sales numbers indicate that there were far less cars sold, so it's possible this could be the final month of consecutive credit usage increases.