U.S. con­sumer bor­row­ing up $16.6 bil­lion in July

Daily Local News (West Chester, PA) - - BUSINESS - By Martin Crutsinger

WASH­ING­TON » Amer­i­cans in­creased their bor­row­ing in July at nearly dou­ble the pace of the pre­vi­ous month, ev­i­dence that con­fi­dent con­sumers are will­ing to take on more debt to sup­port their spend­ing.

The Fed­eral Re­serve re­ported Mon­day that con­sumer debt rose by a sea­son­ally ad­justed $16.6 bil­lion in July, up sharply from a gain of $8.5 bil­lion in June.

The cat­e­gory that in­cludes credit cards rose by $1.3 bil­lion af­ter shrink­ing by $1.2 bil­lion in June. The cat­e­gory that cov­ers auto and stu­dent loans surged by $15.4 bil­lion af­ter an in­crease of $9.6 bil­lion in June. It was the largest gain since an in­crease of $17.9 bil­lion last Novem­ber.

Con­sumer bor­row­ing is closely fol­lowed for the clues it can pro­vide about the will­ing­ness of con­sumers to go into debt to sup­port spend­ing.

Con­sumer spend­ing ac­counts for 70 per­cent of eco­nomic ac­tiv­ity in the United States. Af­ter a slow start this year, con­sumer ac­tiv­ity ac­cel­er­ated sharply this spring. That helped push over­all eco­nomic growth up to a solid an­nual rate of 4.2 per­cent in the April-June quar­ter, al­most dou­ble the 2.2 per­cent GDP gain in the first quar­ter.

Pres­i­dent Don­ald Trump is fore­cast­ing even stronger gains in growth go­ing for­ward but pri­vate an­a­lysts be­lieve the spring quar­ter fig­ure was boosted by some tem­po­rary fac­tors. Those in­cluded a rush to ship U.S. ex­ports of prod­ucts such as soy­beans be­fore re­tal­ia­tory tar­iffs were im­posed by China and other coun­tries re­act­ing to penalty tar­iffs levied by the Trump ad­min­is­tra­tion.

Many an­a­lysts be­lieve growth for the sec­ond half of this year will come in at a still solid an­nual rate of 3 per­cent. If that fore­cast proves ac­cu­rate, it would give the coun­try the strong­est ful­lyear GDP growth in more than a decade.

The July in­crease pushed con­sumer bor­row­ing up to a record of $3.92 tril­lion com­pared to a level of $3.75 tril­lion in July 2017.

The Fed’s monthly credit re­port does not in­clude mort­gages or any other loans se­cured by real es­tate such as home eq­uity loans.


On Mon­day the Fed­eral Re­serve re­leased its July re­port on con­sumer bor­row­ing.

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