Americans increase credit in April
WASHINGTON (AP) – Americans increased their borrowing for auto loans and other types of consumer debt at an annual rate of 0.7 percent in April, the slowest increase in five months, the government said Tuesday. The Federal Reserve reported that the April increase represented a rise in consumer credit of $1.26 billion, significantly below the $7.5 billion increase that many analysts had been expecting.
The 0.7 percent April rate of increase followed a revised 3.9 percent gain in March and was the smallest gain since a tiny 0.2 percent increase last November. The consumer has been the star of the economic recovery from the 2001 recession, boosting personal borrowing to record levels to support continued strong gains in consumer spending.
Total consumer debt now stands at a record level of $2.13 trillion, a figure that does not include an estimated $8 trillion that Americans owe on their home mortgages. The Fed’s consumer credit report does not cover loans secured by real estate. Loans on credit cards and other types of revolving credit fell for a second straight month, dropping at a rate of 0.6 percent in April following a 0.9 percent decline in March. It marked the first back-to-back declines in this category in nearly two years, since consecutive drops in June and July 2003.
Demand for non-revolving debt, a category that includes car loans and loans for boats and recreational vehicles, rose at an annual rate of 1.5 percent in April after a much bigger 6.7 percent increase in March.
Economists expect consumer spending to slow a bit this year under the impact of rising interest rates, but to remain strong enough to support solid economic growth of around 3.5 percent this year, down from last year’s 4.4 percent increase in the gross domestic product.
Some analysts suggested that the slower increase in borrowing in April may mean that consumers chose to use their tax refunds to pay down some of their existing debt rather than take out new loans.
“It was a surprisingly weak number,” said Richard Yamarone, chief economist at Argus Research in New York. “The consumer may be adopting a more prudent role and paying down some old loans.”
But Yamarone noted that consumer spending, which accounts for two-thirds of total economic activity, has risen for 52 consecutive quarters going back to 1992, when the country was still struggling to pull out of the 1990-91 recession.
“I suspect the slowdown in borrowing will be temporary,” Yamarone said.
___
On the Net:
Federal Reserve: http://www.federalreserve.gov
AP-ES-06-07-05 1540EDT