Consumer Debt Up Slightly; Car Loans Jump

Consumers ran up debt in May at a slightly slower pace than the previous month, although borrowing for car-buying jumped sharply.

The Federal Reserve Board said Tuesday that consumer credit--growing for the 24th straight month--swelled by $11.5 billion in May, an annual rate of 14.6%. In April, borrowing grew $11.6 billion or at a 14.9% rate.

As car sales picked up, auto loans soared $3.2 billion in May compared to $1.7 billion the previous month. That amounts to an annual rate of 11.8% or nearly twice the 6.4% rate in April.

“Some strength in auto credit was to be expected,” said economist Elliott Platt of Donaldson, Lufkin & Jenrette Securities Corp. in New York City.

More surprising, he said, was the continued strong buildup in credit card debt. That grew at a 22.1% annual rate, or $6.6 billion, down just slightly from the 23.5% rate, or $6.9 billion, in April.

“It doesn’t really fit with the relatively weak performance of retail sales. But it may be that consumers were slowing down their rate of payments” on credit card balances, Platt said.

The Federal Reserve revised its figures back to the beginning of 1992, producing a bit slower growth in debt for 1993 and 1994 than previously reported. The Fed said total outstanding installment credit as of March this year was about $10 billion lower than earlier figures.

Consumer spending has slowed dramatically this year in reaction to a string of seven increases in interest rates by the Federal Reserve between February, 1994, and this February.

Last week, the Fed reversed course and lowered a key interest rate for the first time in nearly three years in a move to stimulate the faltering economy.

Many analysts predicted the economy would start to bounce back later this year even without help from the central bank.

Even though spending has slowed, consumers have continued to run up big credit card bills. Perk-laden, no-fee cards have helped, and consumers increasingly are using plastic for everyday shopping such as grocery buying.

Consumer credit includes all household debt not secured by real estate.

The category that includes loans for mobile homes, education, boats, trailers and vacations rose in May by $1.7 billion or at a 7.8% annual rate. That compares to a $3 billion surge in April, or a 13.8% rate.

Overall, outstanding consumer credit rose to $956.8 billion from $945.3 billion. All figures were adjusted for seasonal variations.