You normally wouldn’t think it’s good news that consumers are taking on more debt, especially when that debt comes in the form of credit cards, which can be very costly debt. But today’s report from the Federal Reserve that showed the first increase in credit-card debt since the month before Lehman Brothers failed is being viewed as just that – a positive sign about the economy.
In December, credit-card debt rose $2.3 billion to $800.5 billion – the first monthly increase since August 2008. This, combined with a recent Fed survey that found banks were becoming more willing to make installment loans, has some wondering: Has the consumer stopped de-leveraging?
That’s an important question and one worth watching other data points for answers. Clearly, consumers had borrowed too much in terms of mortgages and credit card debt and that exacerbated the recession brought on by the financial crisis in the fall of 2008. Many thought households would de-leverage their balance sheets for years and years because of the scars brought on by the recession and financial crisis.
One month does not make a trend. It could be a holiday-shopping phenomenon. But if we get another month of similar data, expect to hear more about how de-leveraging is over. And that would be a positive sign for the economy as long as consumers don’t get in over their heads again.
