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U.S. Consumer Credit Jumps $18.12 Billion in August, Fed Says

U.S. Consumer Credit Jumps $18.12 Billion in August, Fed Says
Consumers took advantage of declining interest rates to buy vehicles, while higher gasoline prices helped push up the value of their credit-card borrowing. Photographer: Daniel Acker/Bloomberg

Consumer credit in the U.S. rose more than forecast in August, propelled by a surge in borrowing for education and automobiles.

The $18.12 billion rise, the most in three months, followed a revised $2.5 billion decrease in July, Federal Reserve figures showed today in Washington. The median forecast of 34 economists surveyed by Bloomberg called for a $7.25 billion increase. The pickup in non-revolving borrowing, which includes student and automobile loans, was accompanied by the first gain in revolving credit in three months.

Consumers took advantage of declining interest rates to buy vehicles, while higher gasoline prices helped push up the value of their credit-card borrowing. At the same time, job gains may be giving households enough confidence to spend.

“Vehicle sales are pretty strong, which is boosting non-revolving credit,” Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before today’s report.

Estimates for consumer credit ranged from gains of $3.7 billion to $11 billion.

Non-revolving debt, such as that for college tuition and the purchase of vehicles and mobile homes, rose $13.92 billion, today’s report showed.

Demand for automobiles remains an area of strength for the economy. Banks are charging U.S. consumers the lowest interest rates on new-car loans since the Fed began surveying them in 1971.

Auto Sales

Cars and light trucks sold at an annualized rate of 14.9 million in September, the industry’s best sales since March 2008, according to Ward’s Automotive Group. General Motors Co.’s U.S. sales rose 1.5 percent from a year earlier.

“We continue to be encouraged by positive signs” such as gains in housing and consumer sentiment, and lower jobless claims, Kurt McNeil, GM’s vice president of U.S. sales, said on a conference call on Oct. 2. At the same time, “the stiffest headwinds are uncertainty, some of which is related to the sovereign debt crisis in Europe and concerns about the pace of growth here at home.”

Payrolls grew by 114,000 workers in September after a 142,000 gain in August, the Labor Department reported today. The unemployment rate unexpectedly fell to 7.8 percent, the lowest since January 2009, from 8.1 percent.

Borrowing through the federal government, which is mainly for student loans, climbed by $23.9 billion in August before adjusting for seasonal variations. President Barack Obama signed into law a bill to keep student-loan interest rates, now at 3.4 percent, from doubling on July 1. The one-year extension on existing rates affects about 7.4 million students, according to the White House.

Revolving debt, which includes credit cards, climbed by $4.2 billion. The report doesn’t track debt secured by real estate, such as home equity lines of credit and home mortgages.

Higher gasoline prices in August may have helped boost revolving loans. The average price of a gallon of gasoline was $3.70 in August, up from $3.42 the previous month, according to AAA, the largest U.S. motoring organization.

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