Bloomberg the Company

Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Follow Us

Industry Products

Businessweek Archives

Using More Plastic May Not Mean Buying More Goods


Economic Trends

USING MORE PLASTIC MAY NOT MEAN BUYING MORE GOODS

Don't assume that the recent surge in consumer installment debt signals stronger consumption ahead. For one thing, says economist Mark M. Zandi of Regional Financial Associates Inc., part of the pickup simply reflects rising substitution of credit cards for cash and checks. Both businesses and individuals, he notes, are making greater use of credit cards for a wide variety of purchases. Although they pay their card bills on time and thus aren't really borrowing, the level of installment debt outstanding rises.

At the same time, Zandi notes that installment credit has waxed and waned with the mortgage refinancing boom. When refinancing was in high gear in 1992 and 1993, the share of retail sales financed by installment debt declined as many households restructured their mortgage payments and then used the extra cash, in part, to buy goods. "With the collapse in refi activity earlier this year," he says, "consumers are turning to installment borrowing again to finance their purchases." One source of funds has simply replaced another.GENE KORETZ


The Aging of Abercrombie & Fitch
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus