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Slow rise in September's consumer credit
2007-11-07
Consumers borrowing increased in September at the smallest pace in five months as the growth in credit card debt and car loans slowed. The Federal Reserve reported Wednesday that consumer credit rose at an annual rate of 1.8 percent in September, the slowest since April's 1.6 percent mark. The September gain was about half what economists had expected. The sluggish growth reflected lower rates of increase for auto loans and credit card debt. That debt had risen sharply in recent months as consumers started borrowing more heavily on their credit cards once home refinancings slowed The Fed said revolving credit, which includes credit cards, rose at a rate of 4.4 percent in September. That compares with an increase of 9.3 percent in August. The September rate was the slowest in this category since a 0.1 percent increase in April. Nonrevolving loans, which includes auto loans, rose at a 0.3 percent rate in September, compared with 6.4 percent in August. It was the weakest showing for auto loans since they fell at a 2 percent rate in October 2006. Total consumer debt rose by $3.75 billion in September, a sharp decrease from a gain of $15.41 billion in August. Analysts expected consumer debt would rise by $8.5 billion in September. During the housing boom, home sales hit records for five consecutive years and home prices soared. Many homeowners tapped the rising values of their homes to finance increased spending either by refinancing mortgages or by taking out home equity lines of credit. Now that sales are plunging and prices are soft, homeowners are facing greater difficulty using their houses as a source of money to finance other purchases. A Fed survey this week reported that banks have tightened their lending standards following a severe credit crunch in August in the wake of rising defaults on subprime mortgages. Economists are concerned that a slowdown in consumer borrowing will weigh on consumer spending, which accounts for two-thirds of total economic activity. After surging at an annual rate of 3.9 percent in the July-September quarter, the overall economy is expected to slow to a growth rate of around half that pace in the current quarter and the first three months of next year.
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