Consumers’ Credit Buying Rises in July

Consumers boosted their use of credit at the fastest rate in three months in July, the Federal Reserve Board said Monday, taking out more new-car loans and pushing up credit card purchases.

Total consumer installment credit jumped $6.5 billion in July, at a 6.4% annual rate, after a relatively small $800-million increase in June, a 0.8% pace.

The stronger-than-expected July rise will probably keep economic growth brisk in the third quarter, though analysts said it was unlikely to set off alarms at the Fed over potential inflation.

“[Fed] Chairman [Alan] Greenspan has said they’re already watchful and cautious about inflation,” said economist Gary Thayer of A.G. Edwards & Sons of St. Louis. “So there’s nothing in this report today that suggests they have to do anything immediately.”

Speaking Friday at Stanford University, Greenspan said the central bank had to “remain on alert” because of tight labor markets.

Financial markets interpreted his remarks as reassuring, with stock and bond prices rising Monday.

Wall Street economists had forecast a smaller but still robust $4.3-billion rise in consumer credit in July, partly because of aggressive price cuts by auto dealers.

The rise in July consumer credit was the strongest monthly gain since April, when it jumped by $9.6 billion. The Fed previously said that June credit was unchanged from May but revised that upward to an $800-million increase.

In July, auto credit outstanding jumped $3.6 billion, at a 10.9% annual rate, after a much smaller $900-million increase in June.

Credit card debt rose $5.4 billion, a 12.5% annual rate, which was the strongest since January when it advanced $7.3 billion at a 13% rate, the Fed said. Credit card debt had risen $2.4 billion at a 5.6% rate in June.

Other credit, such as consumer bank loans for mobile homes and education but not mortgages, fell $2.5 billion, at a 9.7% rate in July, after an identical $2.5 billion drop in June.