Newspaper article THE JOURNAL RECORD

Consumer Credit Growth Slows

Newspaper article THE JOURNAL RECORD

Consumer Credit Growth Slows

Article excerpt

WASHINGTON -- Borrowing by U.S. consumers increased at a slower- than-expected pace in August, further evidence the economy is cooling from earlier in the year, Federal Reserve figures showed Tuesday.

Consumer credit rose by $4.3 billion for the month to $1.229 trillion after rising a revised $6 billion during July. Previously, the Fed said July borrowing increased $6.5 billion. Before Tuesday's report, analysts had forecast an increase of $4.6 billion in August.

Analysts watch the Fed's credit statistics because it helps them gauge changes in consumer spending, which accounts for two-thirds of overall economic activity. Tuesday's subdued reading could signal households are paring back on purchases and being more cautious with their finances. It could also reflect efforts by banks to toughen lending standards after a record 1 million personal bankruptcy filings last year. "The pace of credit expansion has slowed considerably -- from a peak of about 15 percent year-over-year growth in mid-1995 to roughly 5 percent at present," according to a forecast by David Greenlaw, an economist at Morgan Stanley in New York. Tuesday's report follows Labor Department statistics Friday that showed job growth -- a major influence on consumer spending -- slowed in September from earlier in the year. Also pointing to a more subdued economy, U.S. auto sales dropped 3.8 percent in September from a year ago. Still, a slowdown in consumer credit growth may not be entirely caused by restrained spending or tougher lenders. Many consumers have taken advantage of lower interest, tax- advantaged home equity loans, which are secured by real estate holdings and aren't included in the Fed's credit statistics, to refinance their other debts. Fed Vice Chairman Alice Rivlin on Tuesday gave the economy a thumbs up. "We really are having a period of good news," Rivlin said at a regional conference on the Community Reinvestment Act, sponsored by the Cleveland Fed. "We have an economy which seems to be growing as fast as it can without generating inflation," she said. Also Tuesday, the number of planned job cuts by major U.S. businesses declined 30.1 percent in September to 20,698 from 29,632 during September 1996, according to the monthly survey by the employment firm Challenger, Gray and Christmas. Planned dismissals fell 23 percent from August's announced job cuts of 26,883, the firm said. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.