Consumer Debt Up a Notch in July

Americans took out $5.38 billion more in consumer credit than they paid off in July, the Federal Reserve Board reported Tuesday.

The Fed said the July increase represented an 11.4% annual rate of gain, down from the revised 11.5% annual growth rate for June and the 12.2% annual pace set during the second quarter this year. The July increase followed a $5.39-billion advance in June and rises of $6.46 billion in May and $4.87 billion in April.

The July growth rate was the slowest since April, when credit expanded at an annual rate of 10.6%.

Consumer spending was a key force that kept the economy moving in the April-June quarter, but analysts have expressed fears that the buying spree may be coming to an end as Americans begin to worry about record high levels of debt.

Gains in auto loans accounted for most of the July increase, just as they had in June. In July, auto loans rose by $3.63 billion, down slightly from June’s increase of $3.64 billion.

Revolving debt, including credit cards, rose $626 million in July, an annual rate of 6% and up sharply from a $175-million increase in June. The category that includes cash loans from banks and other short- and medium-term debt rose by $1.21 billion in July, down from a June increase of $1.65 billion.

The various changes put total consumer debt, before seasonal adjustments, at $572.9 billion at the end of July.

Short-term consumer debt has grown by 14.6% since July, 1985.

Short-term consumer debt, which does not include home loans, eats up nearly 20% of the disposable income of the average American. The relatively high level of consumer debt means that most Americans are confident that the economy remains relatively stable and do not expect a recession in the near future.

Some economists worry, however, that consumers have taken on about as much debt as they can sustain.