Consumers, the cornerstone of U.S. economic activity, are still in disarray, data and central bank measures signaled on Monday, as households struggle amid the worst recession since the Great Depression.

The U.S. Federal Reserve announced the extension of programs to boost consumer lending, while credit-card issuers showed that people are increasingly having trouble paying their bills.

Manufacturing appears to be finding a floor, but without a pronounced recovery of consumer spending, any economic recovery is likely to be feeble, since consumers fuel about 70 percent of U.S. economic activity.

The Fed's measures suggest that while the central bank's emergency stopgaps for many parts of credit markets seem to be working, there is still much work to be done in revitalizing lending to consumers for everything from houses to cars, analysts said.

It is rather like triage, said Jay Mueller, senior portfolio manager with Wells Capital Management in Milwaukee, Wisconsin. Several of the markets that were in trouble are functioning much better. The Fed is putting resources where they are most needed, he said.

In a joint announcement with the U.S. Treasury Department, the Fed said it would extend its Term Asset-Backed Securities Loan Facility (TALF) to June 30, 2010 for newly issued commercial mortgage-backed securities.

The Fed and the Treasury also extended TALF through March 31 for newly issued asset-backed securities and already-issued, or legacy, commercial mortgage-backed securities. Both parts of the program were due to expire December 31.

In deciding to extend the TALF's life, the Federal Reserve is trying to address the decline of commercial property markets, widely regarded as the next shoe to drop for many already debilitated smaller and medium-sized U.S. banks. Everybody is concerned about commercial mortgage-backed securities, said Mueller. Fed policy-makers are still trying to get that market functioning, he said.

And after three years of sliding prices, housing activity, although stabilizing somewhat, remains depressed. Home improvement retailer Lowe's Cos posted a 19 percent drop in quarterly profit on Monday and forecast current-quarter earnings below Wall Street estimates as consumers put off big home projects, sending its shares down more than 8 percent.


Bond analysts also remain concerned that over the long term, should foreign investors dump U.S. Treasuries, that could cause economy-wide borrowing costs, including mortgage rates to soar, snuffing out any economic recovery.

The release of June U.S. asset flows data added to those anxieties. China, the biggest foreign holder of Treasuries, trimmed its overall holdings of U.S. government securities by $25 billion in the month, although analysts added that one month's decline was not enough to raise alarms, yet.

An unexpectedly big rebound in the New York Fed's Empire State general business conditions index, to plus 12.08 in August from minus 0.55 in July, might fleetingly support investors' appetite for riskier assets.

But the report did not offset gloom about how heavily indebted U.S. households in fear of still-rising joblessness can ramp up spending in a sustained way.

The jump in the Empire index is pretty healthy and it may contribute to the paring of the massive risk aversion trade from overnight. But the larger theme continues to be the consumer, and he is missing in action, said Boris Schlossberg, director for currency research with GFT Forex in New York.

Some financial institutions are noting that non-payment of debts is still on the rise.

Capital One Financial Corp's U.S. credit-card defaults and delinquencies rose in July as more Americans lost jobs and struggled to pay their debts. Its shares fell about 1.4 percent.

In a regulatory filing on Monday, Capital One said the annualized net charge-off rate for U.S. credit cards -- debts the company believes it will never collect -- increased to 9.83 percent in July from 9.73 percent in June.

The data is gloomier than American Express Co's comments earlier this month, when the largest U.S. credit-card company by sales announced defaults declined in July for a second straight month and said it saw the first signs of improvement in the industry in 18 months.

(Additional reporting by Mark Felsenthal in Washington, Juan Lagorio and Vivianne Rodrigues in New York and Dhanya Skariachan in Bangalore; Editing by Andrea Ricci)