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Credit Card Use Boosts July Consumer Debt

Economy: But the 8% annualized growth is smaller than the double-digit gains of the last two years.

September 10, 1996|From Times Wire Services

WASHINGTON — Consumer debt grew at an 8% annualized rate in July, the biggest increase in three months as credit card usage offset slower demand for automobiles, the Federal Reserve Board reported Monday.

The Fed said the advance, which matched that of April, followed gains of 6.3% in May and 7% in June.

However, the latest increase was considerably smaller than the double-digit gains of the last two years. Consumer credit includes all household debt not secured by real estate.

Many analysts had expected slower growth from June, noting the heavy debt burdens already carried by many Americans. Others, however, believe the debt accumulation problem is exaggerated. They say credit cards are used more frequently now as a convenience and are paid off at the end of the month.

Still, many banks have been tightening credit standards in the face of rising delinquencies and personal bankruptcies in recent months.

The July advance left total consumer debt at $1.16 trillion, up $7.7 billion from June. It passed the $1-trillion mark for the first time last year.

The Fed said revolving credit, which includes credit cards, jumped 19.4% in July. The $7.2-billion increase pushed the total to $454 billion outstanding.

Revolving credit had slowed to a 5.7% advance in June, just the second single-digit gain in the last year.

Also Monday, a private survey showed that U.S. businesses are more optimistic about their own employment and sales outlooks than they are for the overall economy.

The U.S. Chamber of Commerce bimonthly Business Confidence Index--which charts the outlook for economic growth--rose 0.5 point to 54.8 in August from 54.3 in June.

By category, the outlook for the overall economy was down 3.3 points, to 45.5 in August from 48.8 in June. Although businesses surveyed "were more pessimistic about the overall economy," they saw their own sales and employment growing, the chamber said.

In yet another report released Monday, an international employment firm said that job cuts by U.S. corporations fell to the lowest level in 16 months as the economy grew and several industries had a shortage of skilled workers.

The firm, Challenger, Gray & Christmas Inc., cautioned that the drop was not necessarily a trend and that sharp increases in layoffs have followed monthly declines in recent years.

U.S. firms announced 20,309 job cuts, down 51% from 41,843 in July and 39% fewer than the 33,262 in August 1995, Challenger Gray said.

The cuts were the fourth-lowest of any month this decade. The lowest tally in 1995 came in April, when only 15,678 jobs were lost, it said.

Despite the drop in August, 332,665 jobs were cut in the first eight months of 1996, up 24% from 268,844 during the year-ago period.

An average of 41,583 jobs were lost each month this year, up from the 1995 average of 33,605.

"The latest indicators show the economy is growing and consumer confidence is high but jobs continue to go begging," said John Challenger, the firm's executive vice president.

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