Consumer borrowing in Virginia and around the country slowed in August according to a report released by the U.S. Federal Reserve on Oct. 6. The central bank says the nation’s consumer debt load rose by $13.1 billion in August after surging by $17.7 billion in July, but the increase is far lower than the $16 billion predicted by experts. The figures pegged the annual rate of credit growth back to 4.2 percent. The annual rate stood at 5.7 percent at the end of July.
The overall debt picture suggests that consumers are becoming more reluctant to borrow, but a closer scrutiny of the data reveals some trends that have industry analysts worried. The slower credit growth in August was largely the result of Americans taking out fewer car and student loans, but credit card debt is soaring. The annual growth rate of student and automobile debt fell from 6.9 percent in July to 3.2 percent in August, but revolving debt is now on pace to increase by 7 percent for the year. This figure had stood at just 2.5 percent at the end of July.
While consumer advocates may be alarmed by the rise in credit card debt, economic analysts are more concerned about what the figures could mean for a nation that relies on consumer spending to provide 70 percent of its economic output. In the wake of the Federal Reserve report, growth predictions for the economy as a whole were scaled back from 3.1 percent to 2.1 percent.
A rise in revolving debt during periods of economic stress or uncertainty is often an indication that consumers are turning to credit to cover basic necessities like utilities and food. Those with unmanageable financial situations often feel that there is no relief from overwhelming debt, but attorneys might recommend filing for bankruptcy as a possible alternative.