By Scott Pukos, staff writer
Messenger Post
Posted Jan 18, 2012 @ 10:33 AM
Canandaigua, N.Y. — With consumers feeling more confident about the state of the economy, an increased number of people are starting to borrow more. It is a trend that surged in November and December, both nationally and locally, based on reports from the Federal Reserve and local economists.
“Consumer spending was up in general (in the greater Rochester area),” said Greg MacKay, the senior vice president and chief economist at Canandaigua National Bank & Trust. He noted that the increase wasn’t as great as it was in 2010; however, it was still a significant rise — a rise that led to more borrowing.
“Simply put, the amount of debt that people paid off in 2011 was up, so there was more borrowing,” MacKay said.
According to the Federal Reserve, consumer borrowing increased in November by $20.4 billion — it is the largest monthly gain in a decade. Consumers took out more loans to buy cars and swiped their credit cards frequently, primarily to purchase holiday gifts.
Overall, borrowing has increased in six of the past nine months. In November, consumers saved just 3.5 percent. That’s the lowest savings rate since the recession began in December 2007.
While holiday shopping helped the increase, it’s not the only reason people are returning to a “just-charge-it” mentality.
“If we’re talking consumer installment debt, that’s very much a factor of consumer confidence,” said George Conboy, president of Brighton Securities.
He said consumer confidence factors in several things, including the feeling of job security, or if people have been working a lot and want to reward themselves. Consumer confidence is high within the area, Conboy said.
“(Consumer confidence) is driven enough by emotion as by need,” he said.
Both Conboy and MacKay said an economy that continues to improve will aid the trend of increased consumer confidence, and in return, lead to more spending and charging.
“We are far removed from the great recession (of a few years ago),” MacKay said. “We’re seeing an expansion of the economy that will continue for years to come. ... It’s a slow-gathering stone, but sometimes that’s better than a rapid increase followed by fluctuation.”
— Includes reporting by the Associated Press