November's big spike in consumer debt might well be a manageable aberration related to interest-free financing. But just as the recent torrid pace of car sales could endanger automakers' results later this year, some experts worry that a debt-financed buying binge now will strip the economy of needed momentum down the road.

Consumer credit in November jumped by a record $19.9 billion, to $1.653 trillion, amid a boom in mortgage refinancing and car sales. The increase was the largest nominal rise since the

Federal Reserve began reporting consumer credit data almost 60 years ago.

Economists surveyed by Thomson Global Markets had predicted that credit would climb by just $5 billion.

Lighter Load

Several economists said that while personal bankruptcies have

been on the rise of late, November's run-up in debt reflects a trend in which, because of lower interest rates, the overall consumer debt-service burden has been falling.

"It is irrelevant how much debt there is," said James Glassman of J.P. Morgan. "You have to look at what the burden of financing that debt is."

The household debt-service burden, a ratio of debt payments to disposable income, came in at 13.81% in the third quarter, compared with figures above 14% in the prior four quarters.

"Through refinancing, consumers have been able to lock in lower rates forever," Glassman said. In addition, 0% financing deals that

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offered on vehicles have provided consumers with "free money."

Josh Feinman, chief economist at Deutsche Asset Management Americas, argued that the recent credit statistics were "an aberration," boosted almost exclusively by surging auto sales.

"We're already seeing a drop-off in spending, and credit will follow," he said.

A large portion of the gain in November came from nonrevolving credit, which includes auto loans. That jumped $14.4 billion while revolving credit, which includes credit card extensions, increased by $5.4 billion after declining for four straight months.

The Problem

But some economists worry that high debt levels preclude strong consumer spending for the coming months. Because spending never really saw an outright decline this recession, some experts believe there is little room for an explosive increase.

"The consumer leg of the recession still exists," said David Orr, chief capital markets economist at First Union. "I believe it will be hard for consumer spending to increase during the first part of 2002 because of already high debt levels and because incentives last year encouraged consumers to make purchases that they would have otherwise put off until the first quarter."

Orr added that in every recession prior to this one, consumer spending has declined in at least one quarter, something that hasn't happened so far, but he expects that to change in the first quarter of this year.

David Littman, chief economist at Comerica Bank, disagreed. He's looking for spending to grow at a 3% rate this quarter because of monetary and fiscal stimuli and lower energy costs. He also said that while income growth has slowed over the past year, the gains have been more stable than consumption growth.

Increased debt loads "could dampen the pace of the overall recovery," he said. "But since incomes are rising at a 4% clip, I'm not so concerned about it seriously harming the economy."

In November, the National Bureau of Economic Research said the U.S. economy

entered a recession the previous March. Optimists have been hoping that means a turnaround is already under way and that noticeable economic improvements will be evident by the second half of 2002. During the past 50 years, the average recession has lasted about 11 months.

Some economists were impressed with the consumer credit data, noting that despite all the uncertainty, consumers continued to take on additional risk. "It displays consumer confidence in a much more serious way than any survey," said Alan Blinder, a professor of economics at Princeton University.

Experts point out that consumers' ability to repay debts could be hindered if unemployment continues to rise and personal income drops.

"It depends on how deep things get," said Gerald Cohen of Merrill Lynch. "That could be an issue, but we're already three-quarters of the way through the recession, and there are signs things are looking better." The Labor Department said Thursday that

initial unemployment claims for the week ended Jan. 5 fell 56,000, to 395,000, which some viewed as a sign of stabilization in the job market.