Americans continue dipping into savings to pay down debt and purchase durable goods, such as electronics, appliances and furniture. TransUnion said its credit risk index fell again in the second quarter, marking the sixth consecutive quarterly decline. The index, which uses 1998 consumer credit levels as a benchmark, fell 1.9% to 121.22 during the three months ended June 30 from 123.56 a year earlier. The credit reporting agency said the consistent drops in the index reflect lower consumer delinquency rates and debt levels. The second-quarter decline puts the index at a level last seen in the third quarter of 2008 and 6.5% lower than the peak of 129.67 during the fourth quarter of 2009. “This responsible use of credit has given some lenders confidence to ease lending standards and invest more in the acquisition of new credit customers,” according to Chet Wiermanski, chief scientist at TransUnion. He said banks increased lending across revolving and installment loans the past few quarters, but consumers aren’t using the credit. Wiermanski expects more of the same through 2011 with modest improvement in the TransUnion index to levels last seen just prior to the credit and mortgage crisis. Earlier Monday, the Commerce Department’s Bureau of Economic Analysis said personal spending rose 0.8% to $88.4 billion in July while personal income edged up 0.3%. This prompted Capital Economics to boost its estimate for third-quarter GDP growth to about 2.5% from a prior projection of 1.5%. Paul Dales, senior U.S. economist at the Toronto-based firm, said higher spending on durable goods led to a 0.5% increase in real spending, which is the highest gain since December 2009. He said modest gains in real consumption this month and next will result in annualized spending growth of 2.5% in the third quarter, which in itself would add 1.5 percentage points to GDP growth, according to Dales. But Americans are “funding their spending partly by running down savings.” “This trend cannot continue indefinitely,” Dales said. “Moreover, these data precede the plunge in equity prices seen at the start of August, the recent surge in recession fears and any short-term hit to spending from Hurricane Irene.” Still, he said if upcoming data on manufacturing and employment are weak once again as expected, “talk of another recession would seem strange when the economy may be growing at an annualized rate of 2.5%.” Write to Jason Philyaw. Follow him on Twitter: @jrphilyaw

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