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CONSUMER FINANCES CONTINUE TO HEAL;

 NEW YORK, Aug. 24 /PRNewswire/ -- The American Express Consumer Debt Index continued to fall in the second quarter of 1993. It now stands at 216, over 8 percent below its level during the second quarter of 1992 and 20 percent below its peak in the last quarter of 1990 -- a distinct improvement. However, full financial strength is not yet restored, with the Index 26 percent above its 171.3 level in mid-1983, near the start of the 1980s business expansion. The Index was compiled by Economic Advisors, Inc., an affiliate of Lehman Brothers led by Dr. Allen Sinai.
 "Much of the improvement in the Index stems from declines of interest rates, improved financial markets and lower mortgage repayments," said Dr. Sinai. "The decline also reflects an evolution in consumer behavior -- people are cautious about adding new debt. In previous periods of falling interest rates, consumers might have been tempted to increase their debt load as it became easier to service. However, as interest rates have fallen over the last several years, more consumers have used interest savings to pay off existing debt," he adds.
 The Index, which was first introduced in May of this year, is designed to assess the state of consumer's financial well-being and its potential impact on their economic and financial behavior. High or increasing levels of the Index reflect more financial pressure and strain on consumers, and may indicate coming difficulties in consumer spending and borrowing. Low or declining levels reflect an improved or improving situation, support for consumer purchases and less credit risk.
 Second Quarter 1993 - A Slow Improvement.
 The improvement in the Index during the second quarter of 1993, to 216.1 from 218.7 in the first quarter, was modest and reflects the unusually slow nature of the economic recovery. Normally, consumer debt and financial positions quickly recover in a business upturn, a result of lower interest rates, reduced debt, and strong growth in jobs and incomes. "This time, however, a `slow motion' business upturn is preventing the usual gains from occurring so quickly," said Dr. Sinai. "Nevertheless, progress is positive and should continue for a long time."
 A one point decline in the American Express Consumer Debt Index is estimated to be associated with a $1.68 billion rise in consumer spending. The 54.7 point drop in the Index between its peak in 1990 and the second quarter of 1993 has potentially added $91.9 billion in consumer spending.
 Lower interest rates have had a ripple effect, as households keep refinancing mortgages and transfer credit card and auto loan debt into more economical home equity loans. Another sign of improved household financial health is the consumer credit delinquency rate (accounts 30 days or more past due as a percentage of all accounts), which has fallen to 2.38 from its peak of 2.88 in the first quarter of 1992.
 Implications for Spending and Lending.
 The improvement in the Index shows that consumers are in a better position to finance continued growth in spending. However, the Index results do reflect a reluctance among Americans to go into greater debt. The lower level of the Index also suggests a greater ability to spend and borrow at less risk to lending institutions. If the economy worsens, the improved financial condition of consumers will leave American households in a better position to cope, with less risk of default.
 What Affects the Index?
 The American Express Consumer Debt Index is a weighted average of eight key financial measures of consumer debt, debt burdens and interest and loan payments. Of the eight components which make up the Index, four rose and four declined in the second quarter of 1993. The components for the measurement of the Index were chosen based on historical relationships between the components and consumer spending from 1968 to 1993. The components used are (listed in order of weighted importance):
 -- Debt service relative to disposable income (after-tax)
 -- Household net worth relative to disposable income (after-tax)
 -- Consumer installment debt delinquency rate
 -- Non-revolving consumer credit relative to non-equity financial assets
 -- Non-revolving household indebtedness relative to household physical assets
 -- Mortgage repayments relative to disposable income (after-tax)
 -- Auto loan repayments relative to disposable income (after-tax)
 -- Change in the ratio of revolving installment debt to disposable income (after-tax)
 Economic Advisors, Inc. (EAI) is an affiliate of Lehman Brothers, a wholly owned subsidiary of American Express. EAI is a unique economic and financial market advisory firm servicing financial institutions, corporations and government worldwide.
 American Express Travel Related Services Company, Inc. is a wholly owned subsidiary of the American Express Company -- a family of travel, financial and communications businesses.
 -0- 8/24/93
 /CONTACT: Gail Wasserman, 212-640-2675, or Gregory Tarmin, 212-640-4428, both of American Express Travel Related Services Company/


CO: American Express Travel Related Services Company, Inc. ST: New York IN: FIN SU: ECO

MP-SH -- NYTU001 -- 5326 08/24/93 09:00 EDT
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Date:Aug 24, 1993
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