NEWS AND COMMENTARY September 13, 2000 Consumer-Debt Growth Moderated in July By Henry J. Pulizzi, Dow Jones Newswires The Growth Rate Moderated, But Consumers Are Still Drowning In A Sea Of Debt ... Weiss comments WASHINGTON - Americans took on less consumer debt in July than in June, another sign that household spending continues to moderate. The Federal Reserve said Friday that consumer credit expanded a seasonally adjusted $9.4 billion in July, rising at a 7.7% annual rate, the smallest increase since April. The July gain compares with June's revised rise of $14.7 billion, previously estimated at $12 billion, and was below the six-month moving average of $11.9 billion. 'Evidence is that spending is slower, and survey data shows demand for credit has shifted down at the same time lenders are a bit more cautious,' said Geoffrey Somes, an economist at FleetBoston Financial. 'Thus, we expect a marked slowing in credit growth in coming months.' That fits into the soft landing scenario many economists are forecasting for 2001. Financial markets now expect the Federal Reserve to leave interest rates unchanged through the remainder of 2000 as productivity gains continue to offset the threat of inflation. Revolving credit, which includes credit card, retail and bank-card borrowing, rose an adjusted $3.8 billion in July, after rising $5.7 billion the month before. Non-revolving credit - loans extended for cars, education, vacations and mobile homes, also moderated, rising by $5.7 billion in July, or at an 8.2% annual rate. In June, non-revolving credit expanded $9.0 billion, or at a 13.2% yearly pace. At the end of July, consumer installment debt totaled $1.464 trillion, up 0.7% from a month earlier. Even though the pace at which consumers whip out their plastic has slowed this month, it has not subsided. Consumers continue to pile on credit card and other debt - the additional $9.4 billion has brought outstanding consumer debt to a whopping $1.46 trillion. Not only is this an increase from the month before, consumer debt has risen every month since November of 1997. Since then, consumers have tacked on an average of $7.6 billion in debt every month. The interest rate hikes of the past year have done little to curb the appetite of the U.S. consumer. Don't bet on the Fed to cut interest rates so that consumers can spend even more.

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