Stat of the Week: Consumer Credit Up 9.9%

Last Monday, the Federal Reserve announced that November consumer credit surged 9.9%, the fastest monthly increase in 10 years — since the post-9/11 recovery month of November 2001. Credit-card debt rose 8.5%, the biggest monthly jump since 2008, while nonrevolving debt (such as auto loans) rose 10.7%.

This surge in consumer credit should contribute to a rise in fourth-quarter GDP growth since consumer spending represents about 70% of GDP growth. Some economists have now revised their fourth-quarter GDP estimate to an annual pace of 3.4% in the wake of the Fed�s report. In addition, vehicle sales rose 1.5% in December and 8.8% in 2011, while overall retail sales increased by a very healthy 6.5% in 2011.

The sentiment indexes are also turning up. On Tuesday, the National Federation of Independent Business reported that small-business optimism rose to 93.8 in December, up from 92.0 in November. That index has now risen 5.7 points in the last four months. Another good sign is that the Fed�s latest Beige Book survey reported that economic conditions improved in all 12 Fed districts during the last six weeks of 2011. And then, on Friday, the University of Michigan/Reuters� January preliminary consumer sentiment index rose to 74, up from 69.9 in December — a point higher than economists� consensus estimate of 73.

One negative indicator came out on Thursday when the Labor Department announced that new weekly jobless claims rose by 24,000, to 399,000. Ouch! Not only did retailers reduce their temporary help but transportation companies also made job cuts. New jobless claims had been trending lower since mid-September, but now the latest four-week average of new jobless claims has risen by 7,750, to 381,750.

At first glance, it looks as if the recent influx of new jobs could have been a seasonal phenomenon, so we could see the unemployment rate rise this month and next. But perhaps not. Home Depot (NYSE:HD) announced on Thursday that it plans to hire 70,000 temporary workers for its U.S. stores this quarter because it anticipates a healthy spring-cleaning season — and spring is Home Depot�s busiest time of the year.

When I put all of these indicators together, I see rising consumer spending as a rational response to the near-zero yields now available in bank savings accounts. As consumer confidence rises, consumers will decide to spend more now since they aren’t getting significant returns on their bank savings.

By the same token, investors are switching to high-yield stocks rather than accepting low cash yields, especially since the average stock in the S&P continues to return more that 10-year Treasury bonds.