Delinquency rates on consumer loans continued to improve in the first quarter as most key measures fell to their lowest levels in three to four years, the American Bankers Association said.

In the latest upbeat sign for banks and the economy, the ABA's composite delinquency rate on eight types of loans fell to 2.31% from 2.43% in the fourth quarter and 2.60% in the year earlier quarter.

Auto Payments Improved

The percentage of loans at least 30 days past due had not been so low since the second quarter of 1989, when it stood at 2.30%. The composite includes automobile, personal, home improvement, mobile home, and other types of closed-end credit.

In the auto category, first-quarter delinquencies were 2% of loans originated by banks and 2.31% of loans made indirectly through dealers.

The direct fifure fell 8 basis points, back to where it had been in the third quarter of 1990; indirect delinquencies were down 2 basis points, matching the third quarter 1988 level.

Credit card and open-end home equity loans, which are not included in the composite, also hit their best marks since the 1990-91 recession.

Credit card delinquencies fell by 19 basis points in the first quarter, to 2.74% - the lowest since the third quarter of 1990.

Of home equity loans, 1.48% were past due, well below the recent peak of 2.06% in the fourth quarter of 1991.

Economists said the statistics reflect improving financial strength that could soon translate into a modest pickup in consumer demand.

"Jobs are a little more plentiful than they have been in a few years, so consumers are in a better position to meet financial obligations," said Stuart G. Hoffman, chief economist at PNC Bank Corp.

"This should help to promote greater spending in the second half of the year," said James Chessen, the ABA's chief economist.

|Beginning to Use Their Credit'

Mr. Hoffman estimated that consumer loans have been growing at about 5% for the past half year -- a pace that should be sustainable given the delinquency levels.

"Consumers have been paying off loans in the recession and in the first year of the expansion," Mr. Hoffman said. "Now, carefully, they are beginning to use their credit again."

Still, the trend, which has been in evidence for several quarters, is hardly enough to suggest the beginnings of another boom.

Spending Surge Doubted

Allen Sinai, an economist and managing director at Economic Advisers Inc., an affiliate of Lehman Brothers, said any surge in spending will be muted because consumers still devote a greater proportion of their income to debt payments than they did at the outset of previous expansions.

"We're 20% ahead of the very deteriorated financial condition [of the recession], but still 40% away from where we were before the heady days of the 1980s," he said, referring to a consumer debt index he created recently for American Express Co.

Banks Cautioned

"Banks still have to be very careful," Mr. Sinai added. He estimates consumer spending will grow a moderate 2.5% in the second half of this year.

The ABA's report noted that the rate of growth in consumer installment debt slipped slightly in April, to 3.6% from 4.7% in March.

Annual growth in auto credit slipped to 1.9% from 2.3%. Revolving credit, including credit cards, continued to grow at an annual rate of 7.5%.

Nevertheless, the improvement in credit quality was broad-based.

Of the 11 consumer loan types tracked by the banking association, only revolving debt other than credit card loans deteriorated. Delinquencies in that category were up 9 basis points, to 2.72%.

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