Consumer Credit in U.S. Climbed $13.7 Billion in September

Consumer credit in the U.S. rose more than projected in September as borrowing for car purchases and education climbed.

The $13.7 billion increase in credit followed a revised $14.2 billion advance in August that was larger than previously estimated, the Federal Reserve said today in Washington. The median forecast in a Bloomberg survey of economists called for a $12 billion gain. Non-revolving debt, which includes financing for college tuition and autos, rose the most in three months.

A pickup in household wealth from increased property values and stock-market gains is giving Americans the wherewithal to borrow for such big-ticket purchases as new cars. At the same time, revolving debt declined for a fourth month, showing limited job and income growth is prompting consumers to whittle away at credit-card balances.

“It’s the pattern we’ve seen all year and even most of last year -- consumers not really willing to build up credit-card balances” even as borrowing for cars and school tuition increases, said Paul Edelstein, director of financial economics at IHS Global Insight in Lexington, Massachusetts, who projected a $13.8 billion gain in total borrowing. “We can’t preclude the possibility that there’s just been a preference shift in household attitudes toward debt.”

Estimates of the 33 economists surveyed ranged from increases of $8.7 billion to $20 billion. The report doesn’t track debt secured by real estate, such as mortgages and home-equity lines of credit.

Credit Cards

Revolving debt, which includes credit-card spending, decreased by $2.1 billion in September, the most in three months, after falling $885 million the previous month, today’s figures showed. The consecutive declines in revolving credit marked the longest such stretch since November 2010.

Non-revolving credit increased $15.8 billion in September after rising $15 billion a month earlier.

Such lending has been a product of resilient auto sales. Cars and light trucks sold in September at an annualized pace of 15.2 million after a 16 million rate the previous month that was the strongest since November 2007, according to data from Ward’s Automotive Group. Purchases were little changed in October, leaving the industry on track for the best sales in six years.

Ford Motor Co., the second-largest U.S. automaker, achieved a record third-quarter pretax profit of $2.6 billion, lifting its full-year outlook, according to an Oct. 24 company statement.

Auto Loans

Auto lending in the third quarter increased $21.2 billion after a $20.1 billion gain in the previous three months, today’s Fed data showed.

Loans by the federal government and private lenders for school tuitions climbed by $35.4 billion before seasonal adjustment in the third quarter to $1.18 trillion. Educational borrowing increased $9.7 billion in the second quarter, today’s report showed.

The interest rate on undergraduate Stafford loans dropped to 3.86 percent in August, retroactive to July 1, the day the rate doubled to 6.8 percent. The law links financing to 10-year Treasury yields, which had the immediate effect of reducing the borrowing cost for such loans.

Climbing property and stock values are giving consumers the means to spend, supporting the household purchases that make up about 70 percent of the economy.

Disposable income, or money left over after taxes, has held up in 2013. Adjusted for changes in prices, the gauge rose 1.6 percent in August from the same month last year, the biggest gain since the end of 2012, according to Commerce Department data. September data are scheduled for release tomorrow.

At the same time, faster employment and wage gains may be needed to provide a bigger pickup in personal consumption, which rose 2 percent in August from a year earlier.

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