American’s credit usage up in November
WASHINGTON – Americans borrowed money more freely in November, at the fastest pace in three months, as they made heavy use of credit cards and financed autos and other personal items on credit.
The Federal Reserve said Monday that consumer credit increased by a larger-than-expected seasonally adjusted $12.9 billion in November, or 10.2 percent at an annual rate.
Many analysts expected borrowing to grow more slowly in November on the belief consumers were growing more cautious, the result of less confidence in the economy, the stock market’s volatility, slowing job growth and higher energy prices. All these factors tend to make people less inclined to spend.
”The death of consumer spending was greatly exaggerated,” said Richard Yamarone, economist with Argus Research Corp. ”They are ringing registers somewhere.”
Yamarone suggested that November’s jump in borrowing may reflect people having money left over from refinancing home mortgages to take advantage of cheaper, long-term interest rates.
Consumer credit in October grew at a 7.5 percent rate, faster than 7 percent pace previously estimated by the Fed.
November’s 10.2 percent rate of borrowing was the fastest since August when credit use rose at an 10.9 percent annual rate.
In November, demand for nonrevolving credit, such as loans for new cars, vacations and other big-ticket items, led the month’s advance in borrowing. Nonrevolving credit rose by $8.1 billion at an annual rate of 11.4 percent. That was up from $9.4 billion and a 6.1 percent rate in October.
Demand for revolving credit, such as that used for credit cards, rose by $4.8 billion, at a 8.7 percent rate in November, down from $7.9 billion and a 9.2 percent rate in October.
The Fed’s report on consumer credit includes credit card debt and loans for autos, boats and mobile homes. It does not include loans backed by real estate, such as home mortgages or increasingly popular home equity loans.
The Federal Reserve, wanting to prevent the rapidly slowing economy to slip into a recession, unexpectedly cut interest rates last week by one-half of a percentage point. The rate cut is designed to lower borrowing costs, eventually spurring consumer and businesses spending, thus boosting economic growth.
Last year, the Fed was worried that the economy was growing too quickly. Between June 1999 and May 2000, the central bank boosted interest rates six times to slow growth. Now, the Fed and analysts believe those rate cuts may have gone too far in cooling the economy.
On the Net:
Federal Reserve site: http://www.federalreserve.gov/
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