Consumer Borrowing Exceeds Forecast

U.S. consumers kept up a hearty pace of borrowing during November, boosting their credit-buying much more strongly than was forecast, according to a Federal Reserve report released Monday.

Total outstanding consumer credit grew by $12.9 billion at an annual rate of 10.2%.

Wall Street economists had forecast a $8.4-billion increase in outstanding consumer credit during November, anticipating that a widely reported slowdown in overall economic activity would show up in the credit figures.

But the Fed report implied that buying on credit strengthened in November. The Fed said October’s rate of increase was 7.5% after adjusting for unusual items. November’s 10.2% annual rate was the strongest gain in outstanding consumer credit since a 10.9% advance in August.

The Fed said that revolving, or credit-card, credit expanded by $4.8 billion during November after a $7.9-billion surge in October, and that nonrevolving credit, which includes new car loans, was up $8.1 billion following a $9.4-billion increase in October.

Originally, the Fed said October consumer credit had risen by $16.7 billion, but later it revised that figure upward. However, the October total was inflated by two firms, which the Fed refused to identify, reporting assets they had not declared earlier.

Despite the apparent robust growth in consumer credit, the Fed last week cited weakening sales, lower consumer confidence and the drain on consumer purchasing power from rising energy prices when it slashed interest rates by a half percentage point last week,.

The Fed watches the monthly consumer credit report closely as one signal of consumer spending, which fuels two-thirds of national economic activity. The data are relatively old, however, and they are an imperfect measure of consumer activity because they do not include home equity loans that many consumers use to finance costly purchases such as new cars.