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

Consumer Credit in U.S. Climbed More Than Forecast in September
Cars and light trucks sold in September at a 14.9 million annual rate, the fastest since March 2008, after a 14.5 million pace a month earlier, according to Ward’s Automotive Group. Photographer: Daniel Acker/Bloomberg

Consumer credit in the U.S. increased in September for a second month, led by a pickup in borrowing for education and automobiles.

The $11.4 billion gain followed a revised $18.4 billion jump in August, Federal Reserve figures showed today in Washington. The median forecast of 34 economists surveyed by Bloomberg called for a $10.2 billion increase in September.

Improving labor and housing markets may be giving households enough confidence to take on more debt as they finance purchases that account for about 70 percent of the economy. Auto sales in September that were the strongest in more than four years showed some Americans took advantage of cheaper borrowing costs.

“It’s pretty clear that consumer confidence has risen,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. “I think what’s really driving that improvement in consumer confidence is that average Americans are seeing the value of their homes now recover somewhat or rebound somewhat after four or five years of steady declines.”

Estimates in the Bloomberg survey for consumer credit ranged from gains of $7 billion to $19.5 billion after a previously reported August gain of $18.1 billion.

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

Auto Sales

Non-revolving debt, such as that for college tuition or auto purchases, increased $14.3 billion in September after a $14.1 billion gain in August. Demand for automobiles remains an area of strength for the economy. Cars and light trucks sold in September at a 14.9 million annual rate, the fastest since March 2008, after a 14.5 million pace a month earlier, according to Ward’s Automotive Group.

An improvement in the labor market may be giving Americans the wherewithal to borrow. The economy added 171,000 jobs in October after 148,000 a month earlier, Labor Department data show. For the third quarter, payroll growth averaged 174,000 compared with 67,000 in the prior three months.

Lending by the federal government, which is mainly for educational loans, climbed by $13.8 billion in September before adjusting for seasonal variations. President Barack Obama, re-elected yesterday to a second term, signed into law on July 1 a bill that kept student-loan interest rates from doubling.

Revolving debt, which includes credit cards, decreased by $2.9 billion in September after a $4.3 billion increase. Revolving credit has declined in three of the four months to September.

“Credit card spending is the easiest portion of consumer spending to contain, because it’s revolving, and because many of those related expenses are discretionary,” Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, said before the report.

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