U.S. Consumer Debt Rises More Than Forecast in March -
By Vincent Del Giudice -
May 7 (Bloomberg) -- U.S. consumer borrowing jumped more than double
the amount economists forecast in March, indicating a slowing economy
is forcing Americans to ac***ulate credit-card and other forms of
debt.
Consumer credit increased by $15.3 billion for the month to $2.56
trillion, the biggest monthly rise since November, the Federal Reserve
said today in Wa****ngton. In February, credit rose by $6.5 billion,
previously re****ted as an increase of $5.2 billion. The Fed's re****t
doesn't cover borrowing secured by real estate, such as home-equity
loans.
Consumers are turning to credit cards after banks tightened standards
for home-equity loans and other borrowing. The March figures brought
U.S. consumer borrowing in the first quarter to $34 billion, the most
since the first three months of 2001, when the economy entered its
last official recession.
``Consumers are strapped as incomes are not keeping up with inflation
and this is leading them to rely increasingly on credit to see them
through the worst housing downturn since the Great Depression,'' said
Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubi**** in
New York. ``The days of extracting cash from one's home to spend on
goods and services are long gone.''
Economists forecast an increase of $6 billion in consumer credit for
March, according to the median of 34 estimates in a survey conducted
by Bloomberg News.
By category, revolving debt such as credit cards rose $6.3 billion
during March and non-revolving debt, including auto loans, increased
$9 billion for the month, according to the Fed's statistics.
Household Spending
Total borrowing, a key element of consumer spending, increased at a
7.2 percent annual rate in March after rising at a 3.1 percent pace
during February, the Fed said.
Household spending grew at the slowest pace since the 2001 recession
in the first quarter, according to Commerce Department statistics.
Consumer spending accounts for about two-thirds of economic growth.
A Fed re****t two days ago showed the pro****tion of banks making it
tougher for companies and consumers to borrow approached a record in
the past three months.
About half of U.S. banks said they tightened terms on existing home-
equity loans, mainly because of declines in home values below
appraised values, as well as increased defaults and changes in
borrowers' finances, according to the Fed's quarterly survey of senior
loan officers released May 5.
Late Payments
``A few years back banks would lend to anyone who could fog a
mirror,'' said Richard Yamarone, chief economist at Argus Research
Corp in New York. ``Now, banks are reluctant to lend to anyone.''
Overdue payments at the six largest U.S. credit-card lenders reached
the highest since November 2004, according to data compiled by
Bloomberg. An average of 4.11 percent of loans were at least 30 days
late in February and March, according to re****ts filed by American
Express Co., Bank of America Corp., Capital One Financial Corp.,
JPMorgan Chase & Co., Citigroup Inc. and Discover Financial Services.
General Electric Co. will stop writing new consumer loans for
recreational vehicles in North America because financial returns are
too low, the Fairfield, Connecticut-based company announced May 5. GE
is paring its exposure to consumers in developed economies, though it
will still service its existing $3.6 billion loan ****tfolio mostly in
the U.S. and Canada.
In response to criticism from Congress, the Fed released a proposal
May 2 to prevent ``unfair or deceptive'' credit-card lending. The
rules would bar rate increases on existing balances and prohibit so-
called double-cycle billing that often results in higher finance
charges for customers who don't pay off their balances each month.
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To contact the re****ter on this story: Vincent Del Giudice in
Wa****ngton vdelgiudice@[EMAIL PROTECTED]
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