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High retail sales levels could signal more borrowing activity

Jul 25, 2013 Quinn Thomas

With consumers becoming more confident in the economy and their personal financial situations, spending at retailers has likely picked up.

Generally, when people spend more, they borrow more, which is why short term lenders might want to prepare for higher demand in the near future.

Economists surveyed by Bloomberg project that purchases at retailers increased 0.8 percent in June, with the U.S. housing market and economy also strengthening.

"The transition from a soft patch to a more sustained rebound is slowly beginning to take shape," Milan Mulraine, director of U.S. rates research at TD Securities USA, told Bloomberg. "The underlying tone of retail sales is encouraging. The positive momentum in housing will continue."

Another positive sign is the fact that consumer sentiment remained high in early July despite a slight dip from the previous month, according to the Thomson Reuters/University of Michigan preliminary index of consumer sentiment.

As consumers begin to feel more comfortable, spending and borrowing activity typically pick up. In response, short term lending demand could follow suit, so these financial institutions might want to prepare staff for an influx of applications.