Consumer Credit Grows 2.3% in October, All on Credit Cards

The Federal Reserve announced late Friday that consumer credit in the United States expanded in October by $4.7 billion, or at an annual rate of 2.27 percent. All of the increase was due to credit card spending.

Non-revolving debt, which includes auto and boat loans, contracted in October by $1.64 billion, or 1.26 percent. October marked the second straight month non-revolving debt has decreased after the Fed revised its credit numbers for September. Last month, the Fed said non-revolving debt expanded by 0.3 percent in September, but Friday revised that number to a drop of 1.1 percent.

The contraction of non-revolving debt in September and October did not surprise Kaulkin Media consumer finance analyst Dimitri Michaud. “In the current credit markets, lenders are being increasingly cautious,” said Michaud. “Credit grantors are now very reticent to extend non-revolving credit lines, for example an auto loan, to consumers in a gray area of approval criteria as the current market crisis plays out. This could be seen as a real-life manifestation of the nebulous ‘credit crunch’ that’s been discussed in the media this year.”

Last week there were reports that auto delinquencies were also on the rise, potentially forcing lenders to adhere to stricter lending standards (“Auto Delinquencies Up but Threat Uncertain,” Dec. 6).

Credit card lending, meanwhile, was strong in October. Outstanding revolving credit, like credit cards, expanded by $6.34 billion in the month, or at an annual rate of 8.3 percent, according to the Fed. Credit card growth in September was also upwardly revised to $4.6 billion from a previously-announced $3.4 billion. Total outstanding revolving debt in the U.S. now stands at $928.49 billion.

The total credit increase of $4.7 billion was slightly below analysts’ forecast of $5 billion, according to a poll by Reuters. Total consumer credit outstanding in the U.S. is now $2.49 trillion. The Fed’s monthly consumer credit release does not include loans backed by real estate.

There was also news Friday that consumers are becoming increasingly worried about the economy. The University of Michigan/Reuters survey of consumer sentiment showed the lowest reading since Hurricane Katrina and the second lowest reading in 15 years. The survey’s consumer sentiment index was 74.5 for December, down from November’s reading of 76.1 and better than only the reading for October 2005 since the recession of 1992.