Consumer Credit Growth Slows as Interest Rates Rise
Americans took out $2.6 billion more in consumer credit than they paid off in July, a sharp slowdown from the pace of growth during the first half of the year, the government reported Thursday.
The Federal Reserve Board said consumer credit expanded at an annual rate of just 4.8% last month, down from an annual rate of 10.2% from January through June.
The report said the slowdown reflected a drop in auto sales in July and lackluster sales of other consumer goods.
Consumer credit had shot up $8.1 billion in June, even faster than originally believed. A month ago, the Fed had estimated the June advance at a smaller $5.4 billion.
Mike Evans, head of his own Washington economic consulting firm, said the July slowdown showed that consumers are remaining fairly cautious about the future despite the fact that wage gains picked up in July.
“Consumers don’t seem to be buying big-ticket items as they had in the past and that probably reflects the increases in interest rates,” he said.
The Federal Reserve has been tightening credit since late March in an effort to dampen demand as a way of cooling inflationary pressures.
The smaller July increase was led by a $2-billion rise in the category which includes credit card debt. This followed a $3.7-billion June increase.
Auto loans increased by $555 million in July, down sharply from a $2.8-billion June advance.
The category, which includes bank and credit union loans not secured by real estate, declined by $62 million after a $1.4-billion June increase.
The various changes left total consumer debt at $646.9 billion, up 9% from a year ago.