Growth Rate in Credit Buying Drops Sharply

WASHINGTON —  Consumers sharply trimmed their buying on credit during March, the Federal Reserve Board said Tuesday, as installment debts grew at the slowest rate in six months.

Total consumer installment credit rose by $6.4 billion at a 7.3% annual rate, little more than half the February jump of $12.2 billion at a 14.1% rate.

It was the smallest monthly increase in installment debt since September last year, when it was up $4.1 billion at a 5% annual rate.

Every major category of credit buying fell in March from February’s pace, though auto loans rose a slight 0.2%. Auto credit had risen in February by $3.8 billion at a 12.6% annual rate.

The Fed said the last time lending to buy new cars was weaker was in October 1992, when loans shrank by 6.3%.

The overall March slowdown was steeper than anticipated by analysts, who had anticipated that relatively high levels of consumer confidence and strong job gains during the first quarter would buoy credit buying.

But last Friday, the Labor Department said April job growth virtually stalled with only 2,000 new jobs created, raising questions as to whether the economy was headed for sustained stronger growth or whether it will settle back later in the year.

During March, credit card buying increased by $4.8 billion at a 14.1% annual rate, still a fairly brisk expansion though down from February’s $5.3-billion rise at a 15.9% rate.

Robert Dederick, economic consultant to Northern Trust Co. in Chicago, said credit card use was expanding robustly because it increasingly was used as a means of payment to take advantage of incentives such as free airline miles.

“It’s not only a means of extending credit anymore but also a substitute way of paying,” Dederick said.

With interest rates rising, the pace of monthly borrowing increases was likely to slow, Dederick said. “But by any measure, people are still willing borrowers, albeit not as eagerly as before.”

A category of credit simply labeled other, which includes consumer loans for purposes like buying a boat, but does not count home equity loans, posted a $1.5-billion rise in March at a 6.5% rate.

That was less than half the February increase of $3.1 billion at a 13.5% annual rate registered for these catch-all consumer loans.