This is good news:

Consumers Boost Borrowing Despite Prices

WASHINGTON (AP) — Consumers boosted their borrowing in March at the fastest pace in four months, showing resilience in the face of rising energy prices and a painful housing slump.

The Federal Reserve's report, released Monday, showed consumer credit increased at a brisk annual rate of 6.7 percent in March. That marked a pickup from February's 2.8 percent growth rate and was the biggest increase since November.

Consumer spending is indispensable to a healthy economy. The economy grew at an anemic 1.3 percent pace in the January-to-March quarter, the weakest in four years, due to fallout from the housing slump and belt tightening by businesses. Consumers, however, managed to continue spending, an important factor in keeping the economy moving.

Use of revolving credit, primarily credit cards, rose at a sizzling pace of 9.2 percent in March. That was up from a 2.9 percent growth rate in February and was the biggest increase since November.

Demand for nonrevolving credit used to finance cars, vacations, education and other things, also picked up. Nonrevolving credit use rose at a 5.2 percent pace in March, compared with a 2.7 percent growth rate in February.

It would appear that consumers are spending because they have to keep spending (on food, energy, education, medical). There may not be much they can cut back on.

And by the way, I keep close track of food expenses and those have risen 35% in the last 12 months. So no wonder the consumer continues to spend.


posted by Quiddity at 5/07/2007 04:50:00 PM