Read between the lines of rising consumer credit

May 9, 2012, 6:55 PM UTC

Reaching for the plastic.

FORTUNE – U.S. consumers had long been known for their love of credit until the financial crisis changed everything. Credit cards and loans were suddenly out of favor as credit markets tightened and millions saddled with debt lost their homes to foreclosure.

Now the latest data have some suggesting that those days are fading. In March, U.S. consumer credit expanded by 10.2% to $2.54 trillion – the fastest pace since late 2001, according to Federal Reserve data released Monday. What’s more, February’s expansion was revised up to $9.27 billion from an initial estimate of $8.73 billion.

The jump has surprised economists, who watch the data closely for a glimpse on the behavior of consumers. Their spending helps drive the economy, and so it’s easy to think the surge in credit signals that consumers are healing.

But it’s still too early to tell. At this point, it would only be right to buy into the most downbeat interpretation since the figures don’t say much beyond the likelihood that consumers borrowed more out of circumstance or because they were in a bind as opposed to feeling good about their financial prospects.

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For one, non-revolving credit, which includes student loans as well as auto loans, rose by 11.9% to $16.2 billion. In terms of student loans, the surge reflects borrowers trying to lock in interest rates before costs on subsidized Stafford loans automatically double in July. Congress has been trying to work out a deal to keep rates from increasing as high unemployment threatens to cause graduates to miss payments, but on Tuesday night, negotiations stalled.

And as far as the upswing in auto loans, the increase doesn’t necessarily reflect a rebound in demand. During the first four months this year, vehicle sales rose to an annualized rate of 14.5 million. That’s mostly because buyers have been replacing their vehicles, given that the average age of America’s automobiles is more than 10 years – the oldest on record, according to a research note by Nomura Group.

To be sure, revolving credit, which includes mostly credit cards, rose by $5.18 billion to $803.63 billion in March. This marked the first gain in three months, but it’s premature to say if consumers were spending because they felt more optimistic about the economy or because they dealt with higher gas prices and were strapped for cash, says Paul Edelstein, economist with IHS Global Insight. Prices at the pump peaked in March but have fallen sharply for the past few weeks. If the trend continues, April’s consumer credit report will paint a more accurate picture of demand.

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But amid an economy full of imbalances, it’s hard to read too much into the consumer credit report in general, which doesn’t include numbers on home mortgages and other real estate secured loans. Given that the beleaguered housing market is far from turning the corner, a more telling pulse of the consumer is perhaps trends in home loans. For the past three consecutive weeks, mortgage applications have risen as interest rates continued falling to record lows. In the week ended May 4, the Mortgage Bankers Association said its index of mortgage application activity gained 1.7%.

Will this trend continue? Possibly, but it could be stymied by the fact that potential buyers continue to see home prices undergo volatile ups and downs.