Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SATURDAY, April 6, 1991 TAG: 9104060199
SECTION: BUSINESS PAGE: A-8 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Analysts said the report wasn't surprising considering the employment cuts and falling incomes accompanying the recession.
"It is consistent with retail sales being weak, with the decline in the employment numbers and personal incomes," said economist John Silvia of Kemper Financial Services in Chicago.
The Federal Reserve said consumer credit dropped a seasonally adjusted $2.3 billion. It was the second consecutive month that installment debt had decreased at a 3.7 percent rate.
The decrease followed a 0.6 percent decline in December, the first drop since an 0.2 percent dip in February 1989.
The January plunge had been the steepest since a 5 percent decline in February 1987. And, the Fed said, the three-month drop was the first since installment debt fell from December 1986 through February 1987.
Consumer credit includes all consumer loans except mortgages and home-equity debt. It's tracked closely because it helps finance much of overall consumer spending that represents two-thirds of the nation's economic activity.
There have been signs since the end of the Persian Gulf War that consumer confidence and willingness to spend might be picking up. Retail sales rose for the first time since October and both new and existing home sales were up.
Still, chief economist Sung Won Sohn of the Norwest Corp. in Minneapolis expects consumer credit to be weak for months to come.
"I don't see consumers going back to buying big-ticket items until the [economic] recovery is well-established," he said.
All major categories of consumer credit declined in February except for credit card debt, or revolving credit, which increased $1.38 billion, a 7.5 percent annual rate. Revolving credit grew at a 6.8 percent rate in January following a 8.3 percent drop the previous month.
"Consumers are trying to prevent their standard of living from declining," Sohn said. "They're relying more and more on credit cards."
Auto loans fell at a sharp 13.1 percent rate, or $3.10 billion, following a 7.3 percent decline in January. It marked the eighth drop in 10 months in that category, which posted small gains in November and December.
Bank and credit union loans not secured by real estate fell a second straight month, down at a 1.9 percent rate or $339 million. Still, the decline was not nearly as steep as the 14.7 percent plunge a month earlier.
Borrowing for mobile homes sank at a 12.6 percent rate, or $238 million. The 47.8 percent gain in January had erased a 37.4 percent loss a month earlier.
The changes left $734.5 billion in consumer credit still outstanding in February.
by CNB