Many financial analysts believe that the recent Federal Reserve data highlights the return of  U.S. consumer borrowing. 

The Federal Reserve released its update for December 2011 consumer credit outstanding.

Wells Fargo analysts said that a closer look at the component Fed data illustrated that consumers are still "somewhat cautious" in new debt. This is particularly true for borrowing characterized mainly by consumption, they said.

"Most of the increase was the result of the continuing growth in government student lending, which we view as investment-driven borrowing," Wells Fargo analysts stated.

According to analysts,  total consumer credit outstanding rose by a seasonally adjusted $19.3 billion for December 2011. This was then followed a seasonally adjusted $20.4 billion increase in November 2011. For both months, nonrevolving credit comprised most of the rise in outstanding credit.

Revolving consumer credit, on a seasonally adjusted basis, stood at around $801 billion, which went up roughly $3 billion from November 2011. But, this level is about as much as the amount of revolving consumer credit outstanding in October 2010.

On a not seasonally adjusted basis, analysts said that there was a significant holiday increase that equaled that of December 2010. The data in the next six months should be a good indicator of the growth trends in revolving credit.

Wells Fargo analysts cited the Fed’s recent Senior Loan Officer Opinion Survey that pointed to a slow easing of underwriting standards for credit cards and measured increases in debt demand. If these trends persist, they would verify the outlook for modest new credit card ABS based primarily on refinancing maturing issues instead of strong growth in consumer debt.

Non-revolving credit rose by $13.5 billion on a non-seasonally adjusted basis in December 2011, which was well ahead of the $8.3 billion in November 2011.

However, a notable fact is that close to two-thirds of the December monthly rise was still a result of government student lending. It seems that borrowing for consumption, including vehicle purchases, is starting to manifest in the data.

Nonetheless, analysts think that consumers are probably going to stay comparatively cautious about incurring new debt until employment and income growth rates are better, Wells Fargo analysts stated.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.