Americans still spending, borrowing
By Jeannine Aversa
Associated Press
WASHINGTON — Consumers borrowed money at a brisk pace in February and shopped up a storm on their credit cards, despite gloomy news about the nation's economy.
| • | Federal Reserve site: http://www.federalreserve.gov/ |
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Economists were surprised by the performance, given low consumer confidence, stock market volatility, high energy prices and a weaker job market Ð factors that tend to make people feel less inclined to spend.
In January, consumer borrowing grew by a total of $16 billion, or a breakneck 12.5 percent rate. That marked the fastest growth in credit since November.
February's growth in overall borrowing by consumers was led by a big jump in credit card use.
Demand for revolving credit, such as that used for credit cards, rose by a huge $11 billion, or at a 19.9 percent rate in February, up from $6.4 billion and an 11.6 percent rate in January. The growth in revolving credit in February was the biggest one-month gain since September 1995 when revolving credit rose by $11.5 billion, or an astronomical rate of 33 percent.
"The torrid pace of revolving debt suggested that consumer fears of recession couldn't force spenders to keep their credit cards in their wallets," said Richard Yamarone, economist for Argus Research Corp. "If you are the slightest bit hesitant about your financial future, you don't accumulate credit card debt at a 19.9 percent annualized pace," he said.
Nonrevolving credit, such as loans for new cars, vacations and other big-ticket items, grew by $2.4 billion, or at an annual rate of 3.3 percent in February. That was down from $9.6 billion and a 13.2 percent rate the month before.
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.
Trying to stave of recession, the Federal Reserve slashed interest rates three times this year, a move aimed at boosting economic growth.
