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Borrowing may rise with pickup in US economic confidence

Sep 20, 2013 Quinn Thomas

With Americans feeling more confident in the economy, spending could increase, potentially leading to a pickup in borrowing activity. For this reason, it would be wise for short term lenders to ready staff for a higher volume of applications in the near future.

Sentiment toward the economy is on the rise, as Gallup's U.S. Economic Confidence Index hit minus-16 in the week ending September 8, up from minus-18 in the previous seven-day period. In March, the index was at minus-22.

Consumer spending increases aiding economy
Part of the reason the U.S. economy is gaining steam is the fact the Americans are spending more money. One sign of this is the bump in retail sales that likely occurred in August. Economists surveyed by Bloomberg projected a 0.4 percent increase, following a 0.2 percent advance in July. In fact, job and wage gains, coupled with an improvement in household wealth, helped push vehicle sales to the strongest pace since 2007.

"There's some momentum here," Chris Christopher, U.S. economist at IHS Global Insight, told Bloomberg. "Wage increases, even though they're anemic, are outpacing price increases as long as those gas prices stay down. That gives consumers a little bit of spending power."

Jobs market also fueling economic growth
Another factor that is helping benefit the economy is the employment situation, which continued to show positive momentum in August. According to the ADP National Employment Report, the private sector added 176,000 jobs last month.

Medium-sized businesses accounted for 74,000 of those positions, followed closely by small businesses at 71,000 and large businesses at 32,000. All five sectors posted gains, with the vast majority of jobs coming from the service-providing sector.

"It is steady as she goes in the job market," said Mark Zandi, chief economist of 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 Health Care reform have had a significant impact on the job market."

Short term lending could prove beneficial to consumers
With the economy showing signs of strength and Americans spending more money, it would appear as though conditions are favorable. However, that doesn't mean that everyone will be able to avoid financial struggles.

For example, consumers who are feeling more confident in their personal financial situations may feel as though now is a good time to buy a new car. But, after that purchase, there is still the risk an unexpected expense may arise that forces them to stretch their budget.

Unfortunately, such a situation could lead that person to potentially fall short on certain monthly expenses - such as utilities, credit card payments or mortgages. Instead of paying late, short term lending can be utilized.

This type of loan can provide people with the funds needed to stay afloat while they attempt to regain their financial footing. Perhaps the biggest benefit of a short term loan is that it allows consumers to avoid the high fees and penalties that come with missing a payment.