Consumer Debt Rises in Feb.; Wholesale Inventories Grow

American consumers in February increased their borrowing at the fastest pace in four months, the government said Tuesday, as unseasonably mild weather in much of the country encouraged a boomlet in spending.

Consumer debt outstanding grew at a 6.9% annual rate to a seasonally adjusted $1.24 trillion, the Federal Reserve Board reported. That followed a moderate increase of an annualized 4.5% for January and is the strongest since October.

In a separate report, the Commerce Department said that overall, wholesalers’ inventories grew in February and that sales of groceries, professional equipment, machinery and drugs advanced but that sales of paper declined.

Wholesale inventories shot up 1.1% to a seasonally adjusted $274.31 billion after falling 0.5% in January. Sales edged up 0.5% in February to $213.90 billion. Sales were flat in January.

Economists said consumers’ increased borrowing in February was a reflection of optimism about their financial prospects and also of mild winter temperatures linked to the El Nino weather phenomenon. In addition, homes have been selling at a strong pace, encouraged by mortgage rates that are near four-year lows, which in turn has stimulated sales of furniture and other big-ticket household items.

However, for the last year, the figures have shown an overall trend for a deceleration in consumer borrowing. Last November, the amount of balances outstanding actually declined for the first time in four years. It should be noted, though, that the report does not include home mortgages or home equity loans.

Revolving credit rose at an annual rate of 8.8% in February, the government said. That follows the annual rate of 4.6% reported for January and is the strongest in four months.

Auto lending continued to expand in February, but at a slower pace--3.8% versus 6.6% for January.

Other kinds of consumer debt grew at a 7.8% annual rate, the highest in six months. This catchall category includes loans for mobile homes, education, boats and vacations. Economists had expected inventories to rise by only 0.3% in February. February’s 1.1% increase in inventories is the largest since September 1997, when they rose 1.2%.

The inventory-to-sales ratio, which measures how long it would take to deplete inventories at the current sales pace, rose to 1.28 months’ worth in February from 1.27 months’ worth in January, the Commerce Department said.

Inventories of hardware, groceries, drugs and paper rose in February, but those of petroleum, chemicals, farm products and apparel fell.

Sales of groceries surged in February by 2.8%, professional equipment by 1.3% and metals rose by 0.3%.