Consumer Borrowing Makes Surprising Jump

Consumer credit borrowing in the U.S. increased substantially in September from the previous month, spurred on by rises in student and auto loans.

Borrowing rose by $7.39 billion to a total of $2.542 trillion, according to the Federal Reserve. This was a particularly surprising increase after consumer credit fell $9.68 billion August, and analysts only predicted a growth of $4 billion for September.

The increase was apparently led by a jump in borrowing for items like cars and tuition. Non-revolving credit, which includes both those types of loans rose $8.01 billion in September to a total of $1.662 trillion. Revolving credit, on the other hand, which includes credit cards, fell $627 million to $789.62 billion.

In terms of sales, American car companies generally reported increases in September and October, with General Motors Co., Ford Motor Co. and Chrysler LLC among them.

“The evidence of September and October is that there is a strong foundation in the U.S. based automobile industry,” Ken Czubay, Ford’s U.S. sales chief, said on a conference call on Nov. 1 as quoted in a BusinessWeek. “Consumers are just saying it’s time to get a new vehicle. We’re seeing that more and more everyday from our dealers.”

And even as credit card and other revolving credit borrowing declines, it is interesting that big credit-card issuers have still reported strong profits in the latest quarter. Visa Inc., for example, saw the largest spending increase on its cards in the U.S. since 2005.

Yet this spending growth seems to be concentrated among just one segment of the population, according to Visa.

“While encouraging, much of this volume over the past year has been driven by affluent cardholders,” Byron Pollitt, chief financial officer, said on a conference call with analysts on Oct. 26. “As we enter fiscal 2012, it is worth noting that we have not yet seen any discernible broadening of the U.S. credit spending base beyond this affluent income group.”

And with the unemployment rate expected to stay depressingly high in the next year, September’s rise in consumer borrowing may not be a lasting trend.

One Response to “Consumer Borrowing Makes Surprising Jump”

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