Consumer Credit Makes a Comeback in September

U.S. consumer credit — after falling by the largest amount since World War II in August — expanded by $6.9 billion in September, the Federal Reserve said late Friday.

The growth in consumer credit caught analysts off-guard. Those polled by Bloomberg had expected overall consumer credit to be flat for September. But analysts made their predictions after the disastrous month of October.

Revolving debt, or credit card debt, increased by $950 million in September, or at an annual rate of 1.2 percent. Credit card debt expanded by only 0.4 percent in August.

Non-revolving debt, most commonly auto and student loans, increased $5.9 billion or at a 4.4 percent annual rate.

The Fed’s monthly consumer credit report, also called the G.19, does not include real estate debt.

September’s non-revolving debt numbers seem to be at odds with reports from Detroit that auto sales were down significantly in the month. But September is also traditionally a month that sees a lot of student loan originations, which could explain the increase in non-revolving numbers.

Economists are expecting a marked slowdown in consumer credit numbers for October. The Fed’s most recent quarterly Senior Loan Officer Survey noted that banks clamped down on lending in the beginning of the fourth quarter. “Large fractions of domestic banks again reported tightening standards on both credit card and other consumer loans,” the report said.

In August, the Fed reported that consumer credit in the U.S. contracted by a revised 2.9 percent, the largest drop in consumer credit since recordkeeping began in 1943 ("Consumer Credit Falls in August for First Time in 10 Years," Oct. 8).