Americans’ borrowing activity cooled in September, according to a new report from the Federal Reserve Board of Governors. Specifically, total consumer credit outstanding rose by $10.92 billion in September (lagged release) to $3,949.96 billion. That was the smallest gain since June and much worse than anticipated. All of the increase was due to non-revolving credit, which rose by $11.23 billion in September as the total amount of automobile and student loan debt outstanding climbed to record levels.
Revolving credit (consumers’ credit cards), on the other hand, unexpectedly fell by $0.31 billion in September, the fifth monthly decline of 2018 and weak enough to pull the annual pace of growth down to just 3.75 percent, a roughly 2-year low. The recent weakness in revolving credit, along with the continued decline in personal saving, together provide more evidence that the current level of consumer spending may be unsustainable without a marked pickup in Americans’ incomes. Last week’s data on average hourly earnings showed that wage growth is encouragingly accelerating, but whether the gains will be enough to result in another great holiday shopping season for retailers remains unknown.
Sources: Econoday, FRBG, FRBSL
Post author: Charles Couch