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Consumer debt climbs to highest monthly volume in two years

Dec 20, 2011 Philip Burgess

Consumer debt climbs to highest monthly volume in two yearsAmerican consumers took on more debt in October than they have in two years, according to data released Wednesday by the U.S. Federal Reserve. The surge in borrowing was driven largely by gains in non-revolving debt such as auto and student loans. Total credit jumped $7.65 billion to reach $2.46 trillion, the highest volume since October 2009 and slightly larger than the $7 billion hike projected by economists polled by Bloomberg. On the one hand, the surge in credit indicates a willingness to incur debt, which usually translates to higher confidence. However, rising inflation and commodity prices and stagnant wage growth may suggests consumers are beginning to rely on debt to finance their lifestyles, which can be a dangerous trends. Wages have climbed by 1.8 percent over the past 12 months, as inflation climbed 3.6 percent over the same period, Labor Department officials reported last week. "It's hard to determine whether spending on credit is a sign of optimism or a sign of distress, but just anecdotally we feel there is the beginning of tentative feelings of comfort in taking on slightly more debt," Dana Saporta, a U.S. economist at Credit Suisse in New York, told Bloomberg.