- The Washington Times - Tuesday, February 8, 2000

Americans borrowed $11.2 billion more in December than during the previous month to finance their continuing shopping spree, the Federal Reserve said yesterday.

Consumers' credit, excluding their mortgage debt, climbed at a 9.7 percent annual rate in December to a seasonally adjusted $1.39 trillion, according to the Fed report.

December's jump comes after consumer debt rose 13.8 percent in November, when Americans borrowed $15.8 billion more that month than in October the largest monthly increase in debt since 1995.

Despite the Fed's efforts to slow spending by raising interest rates, the economy in its record 107th month of expansion continues to surge supported by vigorous consumer and business spending.

And there's no sign of the spree slowing.

The robust growth in jobs 387,000 were created in January means personal income soared in January and will continue to support the high levels of spending, analysts say.

"This will only add to the willingness of households to spend, spend, spend," Joel Naroff of Naroff Economic Advisers in Holland, Pa., said after the Labor Department released the jobs report Friday.

The Federal Reserve has raised interest rates four times since June, trying to slow spending. The central bank's latest move, which makes borrowing more expensive, occurred Wednesday.

But those rate increases have barely slowed the economy, which continues to barrel ahead. The economy grew by a 5.8 percent annual rate in the last quarter of 1999 and by 4 percent for the year.

The Fed promised last week to increase interest rates more if Americans continue their spending binge.

In a statement issued after two days of deliberations, the Fed said the risk of higher inflation now outweighs all other risks that could bring the record-long expansion to an end. Consumers and businesses have been borrowing and buying more than the economy can produce, it said, and that must change.

Spending helped give the nation's retailers their strongest holiday shopping season since 1992. And the spree continued after Christmas, boosting retail sales to surprisingly strong levels in January, the nation's retailers reported last week. That helped stores finish 1999 with the biggest gains since 1984.

Holiday spending pushed the nation's savings rate to an annual low of 2.4 percent. For the month, it hit 1.5 percent.

"We're a nation of spendthrifts. We always have been, and that's probably not going to change," Richard Yamarone, economist with Argus Research Corp., said last week.

That spending is racking up enormous amounts of debt. Last year, 1.3 million persons filed for bankruptcy protection. That dropped from 1.4 million filings in 1998, but financial experts are still concerned about the high figures.

"When you have this kind of a bankruptcy record in the midst of a booming economy and low unemployment, it's a sign that the system is broken and needs improvement," said Catherine Pulley, an American Bankers Association spokeswoman.

The Senate and House have passed bills making it more difficult for high-income individuals to file for bankruptcy protection, but the differences between the bills must be hammered out.

Shoppers used their credit cards freely in December. Revolving credit primarily credit-card revolving loans grew by an 8.4 percent annual rate, down from a 9 percent rate in November.

Demand for nonrevolving loans, including loans for autos, mobile homes, boats, trailers, education and vacations, in December rose at a 10.6 percent annual rate after a 17.3 percent rate the previous month.

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