Consumer Credit Makes Biggest Jump in 10 Months
Consumers don't care funnymentals either
WASHINGTON -- Heavy use of credit cards and fixed-term loans boosted consumer borrowing in July by the largest amount in 10 months.
Separately, wholesale inventories rose in July for a second straight month as businesses looked forward to a pickup in sales.
Consumer credit expanded by $10.8 billion to a seasonally adjusted $1.724 trillion, the Federal Reserve said Monday. This followed a gain of $8.9 billion in June, revised upward from an initial estimate of $8.4 billion. Consumer-credit data tend to be highly volatile from month to month and are frequently revised.
The increase in outstanding credit was the largest since November 2001. On a yearly pace, consumer credit rose 7.6% in July, up from a 6.2% rate in June.
Overall consumer credit hasn't fallen since January 1998.
Outstanding credit-card debt and other revolving consumer loans rose $6.5 billion to $722.1 billion. That followed a $3.5 billion rise in June.
Nonrevolving credit, which including loans for such things as automobiles and vacations, rose $4.4 billion to a level of $1.002 trillion
In the second quarter of 2002, overall outstanding consumer credit grew at a 6% annual pace, up from a 4.9% pace in the first quarter.
Business Inventories Rise
Inventories at the wholesale level rose 0.6% in July to a seasonally adjusted $284.15 billion, the Commerce Department reported Monday. It marked the largest monthly jump since November 2000.
Economists expected inventories had risen only 0.2%, according to a survey by Thomson Global Markets.
Wholesale sales, meanwhile, rose 0.6% to a seasonally adjusted $230.99 billion. That left the inventory-to-sales ratio unchanged at 1.23, a record low that has been in place since April. The ratio measures how long it would take in months for a company to exhaust its current inventory.
Inventories for June were revised upward to a 0.4% increase from the previously estimated 0.3% rise. June sales increased a revised 0.7% after previously being reported as a 0.6% increase.
Stocks of goods haven't risen for two consecutive months since November and December 2000, when inventories ended a string of 20 consecutive monthly increases.
Cathy Minehan, president of the Federal Reserve Bank of Boston, said in a speech Monday that the economy is recovering at a moderate pace, and that employment and business spending should improve in the remainder of the year.
Indeed, the consensus from the most recent Blue Chip Economic Indicator survey put 2002 economic growth at an annual rate of 2.3% -- moving ahead, but not at breakneck speeds. For 2003, the consensus forecast for gross domestic product was annual growth of 3.2%.
Ms. Minehan, currently a nonvoting member of the interest-rate setting Federal Open Market Committee, said capital spending so far has been "disappointing," but understandable when weighed against the recent recession, troubled stock market, and weak growth overseas.
Businesses sharply cut production when the economy started to slow in late 2000, setting in place a string of inventory declines. The cutbacks started to slow this year, and analysts have expected businesses to begin rebuilding their stocks in the second half of 2002 amid the improving economy.
Stocks of durable goods -- big-ticket items meant to last three or more years -- rose 0.5% in July, led by a 1.8% gain in metals and a 1.3% rise in stocks of automotive products. Stocks of nondurable goods rose 0.9%, with farm-product inventories up 4% and stocks of petroleum products up 1.3%.
"Consumers remain resilient" even amid relatively soft labor markets, Ms. Minehan said in a prepared speech at a technology conference in Marlborough, Mass. "Their levels of confidence about the future remain solid, as evidenced by their willingness to spend on homes, cars and other big-ticket items at rates that continue to surprise." |
