Consumer Borrowing Posts Rare Gain in September
Consumer borrowing increased in September for the first time since January even though the category that includes credit cards dropped for a record 25th straight month.
The Federal Reserve said Friday that consumer credit increased at an annual rate of $2.1 billion in September after having fallen at a rate of $4.9 billion in August. It was only the second increase in the past 20 months.
Americans have been reducing their borrowing for nearly two years as they try to repair their balance sheets in the wake of a steep recession and high unemployment.
For September, revolving credit, the category that includes credit cards, fell for a record 25th consecutive month, dropping by an annual rate of $8.3 billion, or 12.1 percent.
The category that includes student loans and auto loans, rose by $10.4 billion, or an annual rate of 7.9 percent.
The $2.1 billion rise in overall borrowing pushed consumer debt to a seasonally adjusted $2.4 trillion in September, down 2.9 percent from where consumer credit stood a year ago.
Analysts said that consumer credit is continuing to be constrained by all the problems facing households, including high unemployment and tighter lending standards on the part of banks struggling with high loan losses.
Households are borrowing less and saving more and that has acted as a drag on the overall economy by lowering consumer spending, which accounts for 70 percent of total economic activity.
The economy, as measured by the gross domestic product, grew at a lackluster annual rate of 2 percent in the July-September quarter, up only slightly from 1.7 percent GDP growth in the April-June period.