Consumer credit rises for first time in a year

NEW YORK (CNNMoney.com) -- Consumer borrowing increased in January for the first time in a year, the Federal Reserve reported Friday. The news blew past economist expectations which predicted a decline for the 12th straight month.

Total consumer borrowing rose a seasonally adjusted $5 billion, an annual rate of 2.5%, to $2.456 trillion in January, according to the Federal Reserve. Economists surveyed by Briefing.com predicted a decline of $4.5 billion in January.

The Fed also revised the figure for December 2009 to a $4.6 billion decrease in total consumer borrowing. The Fed had previously reported a $1.8 billion decrease in December.

But some analysts say Wall Street should take the news with a grain of salt. Consensus estimates are consistently way off on consumer credit numbers, said Scott Valentin, an analyst with FBR Capital Markets.

Loosening purse strings: As the recession worsened in 2009 and people began pulling back on heavy borrowing and spending, consumer credit began to fall. For the full year, consumer debt dropped by 4% to $2.45 trillion from $2.56 trillion in 2008.

Friday's report may be an indication that consumers are beginning to feel more comfortable with their financial outlook and are starting to spend more. Or it could mean that they simply can't afford to pay down their debt anymore.

It's probably the former, Valentin said.

"We haven't seen any wage growth and asset appreciation isn't there. If you're not getting wage growth, the only way to buy more is through accessing credit," he said. "It's a signal that maybe things are stabilizing for the consumer."

Cutting up the cards: But the trend away from credit card debt seems to be continuing. Revolving credit, which includes credit cards, fell in January by a 2.3% annual rate. Nonrevolving credit like auto, personal and student loans drove the overall increase in January, rising a 5% annual rate.

The Fed's consumer credit report does not include mortgages and other real estate loans.

Earlier Friday, a Labor Department report showed businesses cut 36,000 jobs in February, fewer than the 68,000 jobs economists were expecting. A separate report showed the national unemployment rate remained at 9.7% in February, the same as the month before.