Consumers Borrowing at Moderate Pace
Americans continued borrowing at a moderate pace in February after building debt in January at the fastest rate in six months.
Consumer debt rose at a 6.7% seasonally adjusted annual rate in February to $1.21 trillion, after an increase at a 10.3% rate in January, the largest since July, the Federal Reserve Board said Monday.
The report was slightly stronger than analysts expected because January’s rate was revised upward from an earlier 8.4% estimate. It fits with other evidence suggesting economic growth in the first quarter continued at about the robust 3.8% rate of the fourth quarter.
Consumer spending represents about two-thirds of overall activity. Borrowing by consumers has grown every month since May 1993.
In a separate report, the Commerce Department said profits of U.S. manufacturing companies slipped in the final quarter of last year despite rising sales.
A quarterly survey of about 8,300 companies showed that profits dipped in the fourth quarter to a seasonally adjusted 6.1 cents per dollar of sales, from 6.5 cents in the third quarter of the year.
The decline, which was especially sharp among makers of nondurable goods, occurred as the nation’s gross domestic product accelerated to a vigorous 3.8% annual rate from 2.1% in the third quarter.
Manufacturers’ profits after taxes during the fourth quarter were a seasonally adjusted $58.49 billion on net sales of $961.34 billion. In the third quarter, profits were $61.74 billion on net sales of $948.91 billion.
As a group, producers of nondurable goods reported that their profits fell to $29.89 billion in the fourth quarter from $33.58 billion in the third quarter, the Commerce Department said.
Producers of longer-lasting goods reported that their profits after taxes rose slightly to a seasonally adjusted $28.6 billion in the fourth quarter from $28.16 billion in the third quarter.
The department also said that fourth-quarter profits and sales for big retail companies with assets of $50 million or more rose from the third-quarter pace.
Retailers’ profits after taxes averaged 2.4 cents per sales dollar in the fourth quarter, up from 2 cents in the third quarter.
The Fed report on consumer credit showed that much of the increased borrowing is coming in credit card debt, which grew at a 12.7% annual rate in February after surging higher at a 21.6% rate in January, the biggest gain in 16 months.
However, automobile borrowing slowed to a crawl. It increased at a 0.3% rate after rising at a 3.1% rate in January.
Other kinds of consumer debt rose at a 5.5% rate in February following an advance at a 2.9% rate the month before. This catchall category includes loans for mobile homes, education, boats and vacations.
Economists believe Americans’ borrowing binge will begin to slow this year. They expect the Fed, which nudged short-term interest rates up by a quarter of a percentage point late last month, to continue to increase the cost of borrowing in an effort to slow economic growth and prevent inflationary imbalances from developing.
