Consumers Still Borrowing But Slower
On Wednesday, November 7th, the Federal Reserve announced that consumer credit increased for September at a yearly rate of just under 2 percent. This was the slowest increase in rate since last April. Economists were surprised by the rate for September, stating that it was about one half of what they had expected.
Many experts blamed the slow growth on credit card debt and a decrease in automobile lending during the period.
Depending on who you are the news can be seen as good or bad. The lower rate of increase for these types of transactions, especially in the auto loan and credit card market, can be seen as good news for consumers who are borrowing less. With many households struggling to meet ends now, taking on less credit is a good idea.
For lenders, the story is reverse. They need to tighten up credit standards, but they also need to bring in new business through new loans.
The Federal Reserve said that revolving credit, including credit cards, rose 4.4 percent in September. That number compares to an increase of 9.3 percent in August of this year.
Non-revolving loans, this includes the auto loan market, rose only 0.3 percent rate in September. This is compared to a 6.4 percent increase in August. This was the weakest for car loans since October 2006.
The total amount of consumer debt rose by $3.75 billion in September. This was a massive decrease from the gain of $15.41 billion in August.
Even with the credit card debt slowing down to an annual rate of increase of 4.4 percent, many economists and other experts believe that figure still indicates solid growth. That growth, however, may stall some in the future as banks and credit card issuers begin to tighten up on new credit or increase rates in order to make up for shortfalls.