U.S. consumer credit falls $3.51 billion in October
By Zarana on Monday, December 14 2009
Americans borrowed less for a record ninth straight month in October, another sign that consumer spending will remain weak, making it harder for the economy to mount a sustained rebound. Consumer credit fell at an annual rate of $3.51 billion in October, while economists expected a $9.3 billion decline.
Demand for revolving credit, the category that includes credit cards, fell 9.3%, while borrowing in the category that includes auto loans rose at an annual rate of 2.6%. Overall, revolving debt fell to $888.1 billion from a revised total of $895 billion in September.
Americans' credit card debt stood at $975.2 billion in September 2008. The 13 monthly declines since then have seen U.S. cardholders eliminate $87.1 billion in credit card debt. That means the average U.S. household with at least one credit card, out of which 91.1 million has eliminated roughly $956 in credit card debt during that period.
The 2.6% rise in the category that includes car loans reflected a rebound in auto sales in October after a sharp September drop. That decline followed a surge in August auto sales as consumers rushed to take advantage of the government's Cash for Clunkers incentives before they expired.
The smaller-than-expected decline in borrowing could be a sign that consumers are cautiously moving toward increased spending in some areas, which would be a good sign for the economy going forward. Consumers appear to be willing to go out and make big-ticket purchases such as for cars and that is better than things were looking this summer.
While economists have worried for years about the low rate of U.S. savings, the concern is that consumers could derail the recovery if they start saving too much of their incomes. Consumer spending accounts for 70% of total economic activity.
The 1.7% fall in overall consumer borrowing left that total at an annual rate of $2.48 trillion in October. The $3.51 billion fall in October followed a decline of $8.77 billion in September. The 9.3% plunge in the credit card category followed drops of 10.5% in September, and 10.6% in August. In all, credit card borrowing has fallen for a record 13 straight months. The 2.6% rise in the category that includes auto loans followed a 0.6% drop in September.