WASHINGTON (AP) Consumers, worried about their jobs in the face of layoffs, were a bit tightfisted in May, borrowing money at the slowest pace in 19 months.
Consumer credit rose by a seasonally adjusted $6.5 billion in May, or a 4.9 percent annual rate, the Federal Reserve reported Monday. That was a much smaller increase than the $9.5 billion rise in credit that many analysts had forecasted.
The 4.9 percent growth rate was the slowest since a 4.7 percent rate of increase registered in October 1999.
Mays pace of borrowing was less than half the pace as in April, when total consumer credit rose at a revised 10.5 percent rate, or by $13.7 billion.
The slowdown in borrowing reflects job insecurities and the impact of actual layoffs, which are making consumers more cautious, said Paul Taylor, chief economist at the National Automobile Dealers Association.
To stave off recession, the Federal Reserve cut interest rates six time this year, driving down borrowing costs as a way to spur consumer spending and business investment, things designed to bolster economic growth.
Fed Chairman Alan Greenspan has said one of the biggest factors determining whether the economy slips into recession is how well consumers hold up during the slowdown. Consumer spending accounts for two-thirds of all economic activity and has been a key force in keeping the struggling economy afloat.
Still, some analysts worry that should the employment situation worsen seriously in the coming months, consumers might sharply cut back spending and tip the economy into a recession.
So far that hasnt happened, and just last week Treasury Secretary Paul ONeill said he took comfort in the fact that consumer spending has been holding up fairly well.
In May, demand for revolving credit, such as that used for credit cards, rose by $3.2 billion, or at an annual rate of 5.5 percent, compared with $9.2 billion and a 16 percent rate in April.
Nonrevolving credit, such as loans for new cars, vacations and other big-ticket items, grew by $3.3 billion, or at an annual rate of 4.5 percent. That compared with $4.5 billion and a 6.1 percent rate the month before.
The Feds report on consumer credit includes credit card debt and loans for autos, boats and mobile homes. It does not include loans backed by real estate, such as home mortgages or increasingly popular home equity loans.
Federal Reserve: http://www.federalreserve.gov/
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