AP Finance News
War, Unemployment Hold Down Borrowing
By JEANNINE AVERSA 04/07/2003 14:53:59 EST
Prewar jitters and job worries turned consumers into more cautious borrowers in February. New
financing for cars and other big-ticket items dropped by the largest amount in a decade.
The Federal Reserve reported Monday that consumer credit edged up in February from the previous
month by just $1.48 billion, or at a seasonally adjusted annual rate of 1 percent, the slowest pace in
two months.
The increase pushed total consumer debt up to $1.74 trillion.
February's borrowing figures represented a big slowdown from January, when consumers racked up
$12.3 billion in new borrowing during the month, representing a brisk 8.6 percent pace.
Economists say job worries and uncertainties about the war in Iraq made some consumers feel
reluctant about adding to their debt loads.
"Consumers are being more prudent in their borrowing," said Richard Yamarone, economist with Argus
Research Corp. "As the economy weakens they are opting to be more tightfisted."
February's more cautious borrowing attitude largely reflected a drop in demand for nonrevolving credit,
which includes loans for new cars, education and vacations. Nonrevolving credit fell by $3.90 billion in
February, or at a 4.6 percent rate of decline.
The rate of decline was the biggest since March 1993 and the dollar decline was the largest since
October 1991, the Fed said.
In January, demand for nonrevolving credit jumped at a rate of 10.7 percent, or $9.1 billion.
Although consumers trimmed new borrowing for nonrevolving credit in February, they weren't tightfisted
when it came to using their credit cards.
Demand for revolving debt, such as credit cards, went up by $5.4 billion in February, or at a sizable 9
percent pace.That was a pickup from January when nonrevolving credit rose by $3.3 billion, or at a 5.5
percent growth rate.
The nation's unemployment rate rose to 5.8 percent in February and the economy lost a whopping
357,000 jobs during the month. In March, payrolls fell by another 108,000, though the employment rate
held steady at 5.8 percent, the government reported last week.
The Fed's report on consumers includes credit card debt and loans for cars, boats and mobile homes.
It does not include real estate loans such as home mortgages or increasingly popular home equity
loans.
__ |
