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Improved June consumer spending could lead to more borrowing activity

Jul 25, 2013 Philip Burgess

June proved to be another strong month for the consumer, as American spending trended upward. As a result, borrowing activity could increase, potentially leading to higher demand for short term lending.

The Deloitte Consumer Spending Index edged up to 4.3 in June, from 4.2 in the previous month, with help from housing and the employment situation.

"Strengthening housing and job markets can have a profound impact on consumers' ability and willingness to spend," said Daniel Bachman, Deloitte's senior U.S. economist. "Improvement has been slow but steady month to month, and both housing and employment have regained their footing since last year."

Part of the reason spending was up in June was due to the fact that home prices have been on the rise, bettering household wealth. CoreLogic's Home Price Index revealed a 2.6 percent improvement from April and 12.2 percent year-over-year gain, which is the biggest annual increase since February 2006.

Generally, when spending picks up, borrowing activity follows suit. Demand at short term lenders could rise in the coming months with consumers seemingly benefiting from the improving housing and jobs markets.