Installment Debt Sees $12-Billion Leap in February

Americans’ installment debt grew in February at the fastest pace in eight months, the Federal Reserve reported Friday, as each of the major categories of consumer credit posted sharp gains.

The $12-billion increase in consumer installment credit--the biggest since a $12.8-billion advance last May--generated new concern about whether Americans can maintain their pace of consumer spending, which represents about two-thirds of the nation’s economic activity. Consumer spending already has slowed, growing just 1.2% during the last three months of 1995, down from gains of 2.8% in the third quarter and 3.4% in the second.

Analysts contend that consumers eventually will have to rein in their borrowing as debt levels climb and income growth remains relatively slack. There have already been reports of delinquency rates growing in several areas. The number of Southern California borrowers now delinquent on home loans is the highest in eight years.

The Fed said consumer installment credit shot up 13.9% in February at an annual rate, its steepest since rising 14.4% last June. The $12-billion increase boosted total consumer debt to $1.048 trillion, 14% higher than in February 1995.

Many analysts had expected debt to grow just $10 billion, down from $10.9 billion in January, when credit rose at a 12.7% rate.

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

Revolving credit, which includes credit cards, jumped $6.4 billion, the biggest advance since $7.4 billion last May. The 19% annualized gain is the steepest since 20.5% in June. The increase pushed total revolving debt to $407.2 billion. Automobile loans rose by $3 billion, a 10.3% annualized gain, and pushing motor vehicle debt to $359.3 billion.

The category that includes loans for mobile homes, education, and vacations increased $2.6 billion to $281.2 billion, an 11.3% rate of advance.

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Selected Interest Rates

Averages of daily rates ended Thursday, in percent:

Corporate AAA bonds: 7.38%

90-day CDs: 5.34%

3-month Treasury bills: 5.02%

Bank prime rate: 8.25%

Municipal bonds: 5.90%

Federal funds rate: 5.30%

Discount rate: 5.00%

Source: Federal Reserve Board