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Consumer Credit on the Rise

[Oct 5, 2007.]


The Federal Reserve is reporting that consumer credit is once again on the rise. The rate of borrowing increased 3.7% in July. Still, the rate of growth was slower than it had been in June, when the rate stood at 5.9%.

It appears that consumers are not taking out as many car loans as they had previously done. However, now that it's more difficult to obtain home equity loans because of the overall housing crisis, consumers seem to be binging on credit cards. In fact, credit cards appear to be the method of choice for paying for big-ticket items that might have previously been financed through home equity lines of credit.

Federal officials report that the sum total of consumer credit increased by $7.5 billion in July. That was less than June's increase of $11.9 billion. It was also less than the amount forecasters had predicted. It's unclear, at this point, what factors were involved in the slow growth in consumer credit. However, uncertainty about the economy may have played a role.

Overall consumer debt now stands at a record $2.456 trillion -a record amount. That debt total does not include mortgages and other loans secured by real estate.

Meanwhile, revolving credit increased in July at a yearly rate of 6.6%. That's the third month in a row there's been a substantial increase in the revolving credit rate. It should be noted that revolving credit skyrocketed nearly 11% in May.

In sharp contrast, other types of credit, such as auto loans, increased at a scant 1.9% in July. That compares to a rise of 5.6% in June and 5.5% in May. Last October, non-revolving credit dropped 2.1% - an indication of the problems to come in the auto loan sector.

To find out more about consumer debt, visit the Federal Reserve website at www.federalreserve.gov.

Julie Ann Amos
October 5th 2007

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