Consumer Credit in U.S. Rose More Than Forecast in October

Consumer credit in the U.S. increased more than forecast in October, led by another jump in borrowing for student loans and autos.

The $14.2 billion gain followed a revised $12.2 billion advance in September, Federal Reserve figures showed today in Washington. The median forecast of 36 economists surveyed by Bloomberg called for a $10 billion October rise.

A rebound in the housing market and gradual improvement in reducing joblessness may bolster household spending as consumers take on more debt for purchases that make up about 70 percent of the economy. A jump in auto sales last month indicates cheaper borrowing costs continue to lure Americans.

“Uncertainty regarding the fiscal cliff may be inhibiting businesses from making bold investment decisions, but consumers have not exhibited the same degree of caution,” Dana Saporta, an economist at Credit Suisse in New York, said in a research note.

Estimates in the Bloomberg survey for consumer credit ranged from gains of $5 billion to $16.5 billion. The September increase was previously reported as $11.4 billion.

The report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.

Non-revolving debt, such as that for college tuition or auto purchases, climbed $10.8 billion in October after surging $14.4 billion in September.

Auto Sales

Automobile demand continues to add to economic growth. Cars and light trucks sold at a 15.5 million annual rate in November, the most in almost five years and up from a 14.2 million pace the prior month, according to Ward’s Automotive Group.

Lending by the federal government, which is mainly for educational loans, increased by $6.9 billion in October before adjusting for seasonal variations, today’s report showed. President Barack Obama signed into law on July 1 a bill that kept student-loan interest rates from doubling.

Revolving debt, which includes credit cards, rose by $3.38 billion in October after a $2.19 billion decrease the prior month. Revolving credit has declined in three of the five months through October.

Labor market gains may be boosting Americans’ willingness to borrow. Payrolls rose more than projected and the jobless rate fell to an almost four-year low in November, Labor Department data showed today. The economy added 146,000 jobs in November following a 138,000 gain a month earlier, and unemployment fell to 7.7 percent from 7.9 percent in October.

Nonetheless, confidence took a hit this month as lawmakers fail to reach agreement on averting tax increases and government spending cuts slated to take effect next year. The Thomson Reuters/University of Michigan preliminary consumer sentiment index decreased to 74.5, the weakest in four months, from 82.7 in November, another report showed today.

To contact the reporter on this story: Michelle Jamrisko in Washington at mjamrisko@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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