In December, consumer credit card debt increased for the first time since 2008, according to the Federal Reserve, another strong indication that the American economy is in full recovery mode.
The Federal Reserve's latest snapshot of consumer credit statistics also showed Americans accumulating more debt -- both on their credit cards and in loans for cars, mobile homes, and tuition, among other things -- in the last three months of 2008, after almost 2 years of decline.
"I don't think there's any doubt" consumer spending is improving, said John E. Silvia, chief economist at Wells Fargo. "What we've also seen is the stock market picking up and a decline in jobless claims. This all tells me the same story."
December's rise in credit card debt suggests, in part, that people felt comfortable spending for the holidays. The entire picture suggests, in Silvia's view, that consumers will once again be ready to spend again, even after the holiday season.
"You're probably not going to get the kind of boom in consumer spending that you saw 3 or 4 years ago. But clearly over this period of time, consumers are getting back to something more normal." Silvia added, "My sense is that that willingness to spend is there but not to the extent it was there in 2006 and 2007."
Overall consumer credit debt rose by 6.1 billion, or 3.0%, to $2.41 trillion while revolving credit debt (primarily from credit cards) rose by $2.3 billion (3.5%) to $800.5 billion. Nonrevolving credit rose by $3.8 billion, or 2.8%, to $1.61 trillion.
Consumer spending and debt data support what other leading economic indicators -- expanding manufacturing, a growing GDP -- have shown: the American economy is steadily improving. "We're into an expansion of the economy which will probably last 3 to 5 years," Silvia said.
As for when this increase in spending will translate into jobs, the answer is less clear.
"It's encouraging that lenders are at least allowing credit card spending to go up, but also it's not great that the only way that extra consumption can be financed is through credit cards rather than hiring income," Paul Ashworth, chief U.S. economist at Capital Economics in Toronto told Reuters.
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