Newspaper article THE JOURNAL RECORD

Borrowing Pace Slower Than Expected

Newspaper article THE JOURNAL RECORD

Borrowing Pace Slower Than Expected

Article excerpt

WASHINGTON (Bloomberg) -- Borrowing by U.S. consumers increased at a slower-than-expected pace in November as an increase in auto loans more than offset a drop in credit card borrowing, Federal Reserve figures showed Friday.

Borrowing rose by $3.9 billion to $1.301 trillion after rising a revised $11.9 billion during October. Before today's report, analysts had expected an increase of $5.5 billion for November. Previously, the Fed said October borrowing increased $9.7 billion.

"Given this figure, and some of the other anecdotal evidence, consumers are alive and well and feeling quite confident in their spending," said Kevin Flanagan, an economist at Morgan Stanley Dean Witter in New York. Any slowdown in borrowing could be a result of a strong economy strengthening household finances and eliminating the need for some borrowing. "People are employed, and they're earning an income," Flanagan said. "Also, they are seeing other financial wealth increasing" as the stock market rises. The pace of consumer borrowing actually could be rising, though not in ways the Fed report measures. With mortgage rates low, consumers have been refinancing homes and taking out home equity loans, which typically have lower interest rates than credit card borrowing. These loans, backed by real estate, aren't counted in the Fed report. Economists watch the Fed's consumer credit statistics to help them gauge consumer spending, which accounts for two-thirds of overall economic activity. "Consumers provided almost all of the economic growth in 1998, (and) this positive momentum will continue into 1999," said Sung Won Sohn, chief economist at Wells Fargo & Co. in Minneapolis, in a recent forecast. U.S. retailers had their best holiday season in six years, capped by better-than-expected December sales, as consumers flocked to discounters such as Wal-Mart Stores and apparel makers such as Gap Inc. …

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