The increase followed a revised $15.1 billion gain in December, exceeding economists’ expectations of a $14.7 billion increase in January. Non-revolving debt, including student and auto loans, rose by $16 billion, Money News reports.
Improving labor market conditions, climbing stock prices and stabilizing home values may have increased consumers’ confidence in the economy and encouraged households to spend more.
“There’s been some repair to household balance sheets in the last few years,” Terry Sheehan, an economist at New Jersey-based Stone & McCarthy Research Associates, said, according to Money News. “Consumers certainly have a little more leeway in their borrowing, and with greater employment prospects, we have certainly seen a greater ability to borrow.”
Revolving debt, which includes credit cards, increased by $106 million in January following a $3.2 billion decrease in December.
Cars and small trucks sold at a 15.2 million annual rate in January, a slight increase from the previous month. Auto sales from November to February were the strongest in five years. Ford Motor Co. had its best sales month last month, and General Motors posted a 7.2 percent sales increase.
“The recovery in home prices is building customer confidence, credit is available and affordable, and consumers appear to be taking higher payroll taxes in stride, at least when it comes to replacing older vehicles,” Kurt McNeil, the vice president for U.S. sales and service at GM, said, Money News reports.
Household and non-profit net worth rose by $1.17 trillion in the fourth quarter of last year to reach $66.1 trillion. Household wealth, which has helped to cushion the impact of rising gas prices and higher payroll taxes, is approaching pre-recession levels.