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Consumer credit pool expanding

Non-revolving loans for larger items such as cars were also taken out at a greater rate by consumers, as evidenced by the sales pace currently exhibited within the auto industry - its best since 2007.

Consumer credit in the U.S. experienced its most significant surge in five months during October, according to a recent report by Bloomberg.

The survey of a range of economists revealed that consumer borrowing rose steadily at the start of 2013's fourth quarter, with Americans taking out more loans for car purchase and continued education, in particular. The Federal Reserve reported an $18.2 billion increase in consumer credit, which followed a revised gain of $16.3 billion for September - a significant bump from the initially reported $14.5 billion.

Expanding employment, salaries spur more borrowing
Jobs gains and income growth are reportedly leading to increased credit-card borrowing, while rising household wealth and renewed equity for many homeowners lent themselves to enhanced consumer confidence. Non-revolving loans for larger items such as cars were also taken out at a greater rate by consumers, as evidenced by the sales pace currently exhibited within the auto industry - its best since 2007.

"Non-revolving credit has been the driving force behind consumer credit growth basically since the recession," Dana Saporta, director of U.S. economics research at New York-based Credit Suisse, told Bloomberg. "As incomes start to pick up and those that have jobs have more confidence that they'll see income growth, we could see this revolving component post more consistent gains."

Bloomberg's report did not track debt secured by real estate, meaning in the form of mortgages or home equity lines of credit. Still, the credit-increase estimates made by the 34 economists surveyed ranged from $10 billion to $17 billion, following the previously reported advance of $13.7 billion in September. Some of the greater-than-expected employment growth displayed in the most recent Employment Situation Summary contributed to the newfound confidence and willingness to borrow. According to the November jobs report, employers added 203,000 new jobs and the unemployment rate fell to 7 percent - its lowest level since November 2008. The accelerated rates of job growth, whether they directly affect consumers or not, may be creating a sense of economic sustainability that leads people to feel more comfortably about borrowing again.

Revolving debt, according to the survey, increased by $4.3 billion in October after declining by $218 million in September. Revolving debt includes that attributed to credit card spending. Non-revolving debt rose $13.9 billion in October following an increase of $16.5 billion the previous month. Reflective of those statistics are the trends seen within the auto lending industry over the past few months. In November, cars and light trucks were sold at an annualized rate of 16.3 million, the strongest level exhibited since 2007, per data from Ward's Automotive Group.

Auto industry viability 
November auto sales gains in the U.S. were led by much-maligned General Motors Co. and Chrysler Group, LLC, with both companies meeting or exceeding estimates from analysts while also increasing year-end and dealership incentive programs to minimize vehicle inventory levels that had been rising.

For GM, car and light truck deliveries increased by 14 percent in October, while Chrysler saw a jump of 16 percent and Ford Motor Co. sold such units at a rate increase of 7 percent. Each of those automakers met or beat estimates from analysts made heading into the month. GM was expected to increase sales by 14 percent, while Chrysler and Ford growth were anticipated at rates of 11 percent and 5.6 percent, respectively, according to an earlier survey by Bloomberg. Estimates were also exceeded by both Toyota Motor Corp. and Nissan Motor Co., each of which experienced sales gains of greater than 10 percent.

Companies such as AutoNation, Inc., of Fort Lauderdale, Fla., have reaped the benefits of such a surge in lending and subsequent sales.

"The auto-credit environment remains strong," Michael Jackson, CEO of AutoNation told Bloomberg. "[Future sales gains are] dependent upon the fundamental strength of the economic recovery in the U.S. and whether the employment picture has significantly improved from what it is today."

Consumer loans granted by the federal government also continued their rise in October. Following a seasonally adjusted increase of $12.8 billion in September, government loans were awarded by an additional $5.2 billion, with school tuitions accounting for the majority of that figure. Falling interest rates contributed to that rise in activity, with the average rate on an undergraduate Stafford loan falling to 3.86 percent - just barely more than half of the 6.8 percent figure seen as recently as July. Linked financing to 10-year U.S. Treasury yields played a role in the reduced cost on student loans, particularly those seen by Stafford borrowers.

With rising property values and stock gains continuing to cushion borrower confidence, the trend may continue. Household purchases account for approximately 70 percent of the economy, and while the housing market continues a gradual climb back to sustainability, lending of all sorts seems to taken on a renewed rate of activity.