Sound the Charge!

The good news: Consumer spending is up. The bad news: More are missing payments on their credit cards.

Uncork the champagne! (But only if you have enough cash to pay for it.)

Consumer spending, adjusted for price changes, increased 0.9 percent in August from July’s levels, according to the Commerce Department. That’s the largest increase since June 2005.

It’s another indicator that the economy is beginning to grow after a year of recession, said Rebecca Blank, the department’s undersecretary for economic affairs.

“There is a long road to recovery still in front of us, but expanded consumer spending in nearly every category indicates that consumers are feeling more confident,” Blank said. “Further stimulus spending should strengthen economic gains and promote growth in additional sectors in the coming months.”

The leading contributor to August’s increase in consumer spending, however, was the Cash for Clunkers program, which boosted auto sales. That program is no longer with us.

Plus, there’s a danger that consumers could get overconfident. A separate report from the American Bankers Association shows that consumer delinquencies on credit cards, home equity loans, and home equity lines of credit hit record highs in the second quarter of 2009. Payments were overdue by 30 days or more on 5 percent of all bank-issued credit cards.

“Falling behind on debt payments is an unfortunate side effect of high unemployment and a frozen job market,” said ABA chief economist James Chessen. “The picture won’t change until the labor market improves and the economy picks up steam. This is going to take some time.”

So while our economy depends on consumer spending in the short run, too much spending by consumers who don’t have the means to repay their debt can cause real problems in the long run.

You’d think we’d have learned that lesson from the subprime-mortgage crisis. Some consumer advocates, however, are upset that mortgage lenders denied nearly one in three loan applications last year, according to a new report from the Federal Reserve.

Lenders have become more conservative. Shouldn’t consumers? Yeah, we need them to buy stuff, but only if they can pay for it. Who do they think they are, Uncle Sam?