WASHINGTON — Consumers borrowed more freely in July, especially when it came to taking out new loans to finance cars and other big-ticket purchases and to pay for vacations and school.
The Federal Reserve reported Monday that consumers increased their borrowing by a seasonally adjusted $6 billion, or at an annual rate of 4.1 percent. That pushed up total consumer debt to $1.77 trillion.
"Consumers opened up their wallets in July and financed cars, tuition and back-to-school merchandise," said Richard Yamarone, economist with Argus Research Corp.
The borrowing behavior of consumers in July marked a pickup from June, when consumer credit rose at just a tiny 0.1 percent rate, a mere $151 million. Economists said consumers tightened the belt on borrowing in June as the nation's unemployment rate shot up to a nine-year high of 6.4 percent.
Even though the unemployment rate dipped to 6.2 percent in July, then to 6.1 percent in August, businesses continued to slash jobs. Economists believe the battered job market will be one of the last parts of the economy to heal.
Much of July's strength came from an increase in demand for nonrevolving credit, which includes loans for new cars and vacations. Such borrowing rose by $5.7 billion in July from June, a 6.6 percent growth rate. That was up from an increase of $1.4 billion, a 1.6 percent rate of increase in June from May.
Demand for revolving debt, such as credit cards, went up at a 0.5 percent rate in July or $327 million. That marked a turnaround from June when consumers trimmed such borrowing at a 2.1 percent rate or by $1.3 billion.
The Fed's report includes credit card debt and loans for cars, boats and mobile homes. It does not include real estate loans such as home mortgages or increasingly popular home equity loans.
Yamarone said the sluggish job climate could make consumers more cautious borrowers in the future. "I think the uncertainty of the labor market will cause some people to tighten the belt," he said.