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August consumer spending bump could fuel borrowing activity

Sep 29, 2013 Philip Burgess

When consumer spending picks up, borrowing activity tends to follow suit, so the bump in August could lead to short term lenders seeing additional applications.

With demand for autos reaching a near six-year high, spending probably jumped for the fourth consecutive month in August, according to economists surveyed by Bloomberg. These experts project a 0.3 percent bump, following the 0.1 percent advance in July.

As the jobless rate continues to decline, Americans are beginning to feel more comfortable with their job security, which likely led to the spending increase. Other factors influencing Americans include rising home values and surging stock prices.

"People are a little more encouraged about the job market, which is getting gradually less bleak," Scott Brown, chief economist at Raymond James & Associates Inc. told Bloomberg. "It's a general trend of improvement we're seeing in the economy."

U.S. economy posts strong job growth in August
Part of the reason Americans are willing to spend more is the improving employment situation, which continued its positive momentum in August.

Private-sector employment increased by 176,000 positions in August, according to the ADP National Employment Trend Report. Medium-sized businesses led the way with 74,000 new jobs, followed by small and large businesses, adding 71,000 and 32,000 positions, respectively.

"It is steady as she goes in the job market," said Mark Zandi, chief economist at Moody's Analytics. "Job gains in August were consistent with increases experienced over the past two-plus years. There is little evidence that fiscal austerity and healthcare reform have had a significant impact on the job market."

Short term lending demand may rise in the future
With the potential for higher levels of consumer spending, short term lending could become more in demand in the coming months. Generally, when conditions favor Americans, people believe financial troubles are less likely, but that isn't always the case.

For instance, should an unexpected expense arise after a major purchase, consumers may be short on money. As a result, monthly essentials may be difficult to afford. Fortunately, short term lending is available to provide assistance during these trying times.

This type of lending has come under criticism in recent months, but it can actually be beneficial for consumers. Instead of incurring late fees and penalties for missing a bill payment, Americans can obtain funds fast and stay current on their credit card and utility bills.