Americans Keep On Borrowing
Americans continued borrowing at a moderate pace in February after building debt in January at the fastest rate in six months.
Consumer debt rose at a 6.7 percent seasonally adjusted annual rate in February to $1.21 trillion following an increase at a 10.3 percent rate in January, the largest since July, the Federal Reserve said Monday.
The report was slightly stronger than analysts’ expected because January’s rate was revised up from an earlier 8.4 percent estimate. It fits with other evidence suggesting economic growth in the first quarter continued at the robust 3.8 percent rate of the fourth quarter.
Consumer spending, supported by strong job growth, is powering the economy right now. Borrowing by consumers has grown every month since May 1993.
“I don’t think this number suggests that consumers are splurging … but it fits in with the economy starting out (the year) quite strongly,” said economist David C. Munro.
Much of the increased borrowing is coming in credit card debt, which grew at a 12.7 percent annual rate in February after surging at a 21.6 rate in January, the biggest gain in 16 months.
However, automobile borrowing slowed to a crawl. It increased at a 0.3 percent rate after rising at a 3.1 percent rate in January.
Other kinds of consumer debt rose at a 5.5 percent rate in February following an advance at a 2.9 percent rate the month before. This catchall category includes loans for mobile homes, education, boats and vacations.
Economists believe Americans’ borrowing binge will begin to slow this year. They expect the Federal Reserve, which nudged shortterm interest rates up by a quarter of a percentage point late last month, to continue to increase the cost of borrowing in an effort to slow economic growth and prevent inflation.
And there are signs consumers’ are reaching their limit. Personal bankruptcies topped a million for the first time ever last year. And the percentage of credit card holders behind on their payments is at the highest level on record.
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