Consumer Debt Surges 7.4% in July

Americans took out a seasonally adjusted $4.47 billion more in consumer credit than they paid off in July, the biggest increase in debt in eight months, the government said Monday.

The Federal Reserve said consumer credit rose 7.4% at an annual rate following a revised 0.2% gain, or $116 million, in June. The central bank originally had reported the June increase at 0.8%.

The July advance was the largest since a 7.8% jump in November and approximated the $4.42-billion monthly average of 1988 and 1989. The Fed said consumer credit growth slowed to an average of $1.78 billion a month during the first seven months of 1990.

Private analysts expected a net increase of $1.5 billion for July following June’s weak showing.

“There are two explanations” for the sharp increase, said Sung Won Sohn, chief economist for Norwest Corp. in Minneapolis. “One is that it simply is a statistical aberration” and will decline in coming months to $1 billion to $2 billion a month.

“The other, more important possibility is that consumers are getting pinched right now,” he added.