Archive for Tuesday, August 8, 2000

Consumer spending slows, government says

August 8, 2000

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— Borrowing by Americans, both on credit cards and to finance auto and other personal loans, slowed only slightly in June from May's torrid pace.

The Federal Reserve said Monday that consumer credit increased by $12 billion in June, or 9.9 percent at an annual rate, while the category that includes auto loans rose by the largest amount since January 1999.

The overall figure was higher than economists had expected after a huge jump in May that was revised upward in the new report. The Fed said overall borrowing rose by $14.2 billion in May, or an annual rate of 11.8 percent, the second largest gain in 17 months.

The overall economy, as measured by the gross domestic product, accelerated in the April-June quarter to a strong 5.2 percent, rather than slowing as had been expected.

However, the strength came from strong business investment and government spending rather than the consumer. Consumer spending slowed from an increase in the first quarter of 7.6 percent, which had been a 17-year high, down to a 3 percent annual rate of growth.

"We are starting to see a slowdown," said David Wyss, an economist at Standard & Poor's DRI, who predicted that growth in the second half of the year would be lower than the first half.

The consumer credit report said that borrowing for revolving credit, a category that includes credit card debt, rose by $3.7 billion in June, an annual rate of increase of 7 percent.

Nonrevolving credit, which includes loans for autos, mobile homes and boats, rose by $8.3 billion, an annual rate of increase of 12.1 percent. That was the biggest advance since a 16.3 percent rise in January 1999.

Total outstanding consumer credit grew to $1.456 trillion in June, up from $1.440 trillion in May.

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 home equity loans.

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