The American consumer appears to be levering-up again. But ahead of Wednesday's consumer credit report, the big debate among economists is whether borrowing signals economic growth or economic strain.
According to the Federal Reserve's latest report , total consumer borrowing reached $2.5 trillion in December of last year, nearly matching the pre-recession level. January's report, which will be released later Wednesday, is forecast to add an additional $10.45 billion.
"For the first time since the recession, we're starting to see bank credit increase. That historically has been the catalyst for strong economic growth," said Paul Kasriel, chief economist at Northern Trust.
Banks constitute the largest proportion of total consumer credit lending, to which various finance companies, credit unions, savings institutions, and the government also contribute.
It follows, Kasriel said, that bank lending is the most important factor for economic growth. "It's what has been lacking up until recently in this economy."Others are not so certain, and expect credit growth to taper off given two persistent drags on the economy: housing and unemployment.
"The consumer credit rebound is not sustainable," said Thomas Berner, an economist at UBS. While consensus estimates $10.45 billion will be added to the Fed's borrowing total, Berner is forecasting $6 billion.Page 1 of 3 | Next Page