Balances on credit cards leaped in December 2013 even more than usual for the holiday season, the government said, posting a third month of growth as consumer spending surged.
Americans' revolving debt load climbed at a seasonally adjusted annual pace of 7 percent, according to the Federal Reserve's G.19 consumer credit report. That followed a revised 0.7 percent rise in November and 5.6 percent in October.
The Fed's gauge of total short-term consumer debt, which adds car loans and student loans to revolving debt, rose at a 7.3 pace in December.
The gain came as consumer spending jumped 0.4 percent for the month, about double analysts' consensus forecast. "The fact that consumer spending has accelerated by its strongest pace in over three years ... speaks to resilience of this stage of the recovery," Thomas Feltmate of TD Economics said in a research note.
However, income growth has not kept pace with the appetite for credit, putting a lid on household leverage, other economists say. Personal income continued to drag its feet in December, rising less than 0.1 percent, the Commerce Department said. After inflation, real spending power fell 0.2 percent.
Although defaults on debt remain low, "the underlying factors indicate we may be reaching a saturation point for consumer debt," said Gregory Miller, chief economist at SunTrust Bank.
Revolving debt, at $861.9 billion, remains about 16 percent below its 2005 peak of $1 trillion, the Fed's data shows. But total short-term consumer debt, at $3.1 trillion, has surpassed its 2008 pre-recession peak by about 15 percent.
Miller said he expects credit card balances to remain flat or erode slightly in coming months. "I think we've had a run, and we're approaching overall household credit capacity."
For the full year of 2013 revolving debt grew 1.9 percent, the Fed said in its preliminary report for December, while total consumer debt climbed 6.2 percent.
Crosscurrents in the economy
Consumer caution isn't the only reason debt on cards is lagging other forms of borrowing. As 2013 ended, Americans showed more interest in applying for new cards, but bankers were not as eager to hand them out, according to the Fed's quarterly survey of senior loan officers. Nineteen percent of the bankers said demand for cards was up, while only 7 percent said they had eased their standards for approving card applications.
Bankers, stung by unpaid bills during the recession, remain wary of weakness in the job market, and December's job picture was not reassuring. The Labor Department's monthly look at unemployment "was a lousy report all the way around," Regions Bank Chief Economist Richard Moody said in a research note. Employers added 74,000 jobs, less than half the number expected. The unemployment rate declined, from 7 percent to 6.7 percent, but for an unhealthy reason: the seeming improvement reflected a shrinking work force, as discouraged job seekers gave up looking for work.
Jobless numbers for January, which were announced Friday, failed to reassure economists about the strength of the labor market, which has a strong influence on consumers' spending and borrowing as well as banks loan standards. The unemployment rate fell to 6.6 percent, but growth in payroll employment remained weak, economists said, with 113,000 new nonfarm jobs created. Long-term unemployment is coming down but remains stubbornly high, with 3.6 million people unemployed for 27 weeks or more.
Unusually harsh winter weather may be the culprit, Moody said, as builders and other industries feel a chill in activity. "Sure, it's always cold in the winter time, but the past two months have seen unususally cold temperatures and significantly above average amounts of snowfall," he said in a research note. Jobs and growth could rebound strongly if consumers and businesses decide to make up for lost time when the weather turns.
See related: Fed: Card balances rise again