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High consumer confidence levels could lead to more borrowing activity

Jul 23, 2013 Philip Burgess

With consumer confidence remaining high in July, consumers could begin to spend and borrow more in the coming months.

As a result, short term lending demand may pick up, so financial institutions should prepare for an influx of applications.

The Thomson Reuters/University of Michigan preliminary index of consumer sentiment dropped slightly to 83.9, from 84.1 in the previous month. The median forecast from economists surveyed by Bloomberg called for a gain to 84.7.

"It's a slip in confidence from recent highs rather than the start of a new downward," Gennadiy Goldberg, strategist at TD Securities Inc, told Bloomberg. "As we get later in the year and the economy improves, consumers will start to see better numbers and they'll notice that."

Bloomberg's Consumer Comfort Index reaffirmed the notion that confidence levels are high, as it reached a level not seen in more than five years, rising to minus-27.3 in the week ending July 7.

As long as confidence levels continue to remain high, spending and borrowing activity could be elevated. That said, short term lenders should prepare employees to handle an increased level of loan applications.