Consumer-borrowing gain highest in decade

Americans are feeling confident enough in the economy to go back to a time-honored tradition: taking on a little extra debt.

Consumer borrowing surged in November by $20.4 billion, the Federal Reserve said Monday. That's the largest monthly gain in a decade.

Consumers took out more loans to buy cars and swiped their credit cards more frequently to purchase holiday gifts.

The Fed's category that measures credit card debt rose by $5.6 billion, the most since March 2008. Its gauge that tracks auto loans increased $14.8 billion, nearly matching July's gain, which was the biggest since February 2005.

The third straight monthly increase in overall borrowing marks a departure from the more thrifty habits practiced during and immediately after the recession, when credit tumbled and the savings rate climbed.

Many Americans are taking on more debt after seeing the unemployment rate drop and the economy improve, albeit modestly. Consumer confidence is up, holiday sales were solid and the U.S. auto industry is coming off its best two sales months for the year.

In December, employers added 200,000 jobs and the unemployment rate fell to 8.5 percent, the government said Friday. It was the sixth month in a row that the economy had added at least 100,000 jobs, the longest streak since 2006. And the unemployment rate hasn't been that low in nearly three years.

A brighter outlook for the economy has prompted Americans to step up spending, even though their wages didn't keep pace with inflation in 2011. Many are tapping into their savings, or borrowing more, as a result.

Borrowing has increased in six of the past nine months. And consumers saved just 3.5 percent in November. That's the lowest savings rate since the recession began in December 2007.

Americans saved less than 3 percent of their after-tax income in the three years before the recession began. But in 2008, as the unemployment rate began to rise and home prices fell, consumers cut back on spending, borrowed less on their credit cards and saved more. The annual savings rate rose above 5 percent in 2008 and stayed above that level until 2011. At the same time, consumer borrowing fell for 26 straight months, from October 2008 until December 2010.

The Federal Reserve's borrowing report covers auto loans, student loans and credit cards. It excludes mortgages, home equity loans and other loans tied to real estate.