After a record drop in August (revised to $-6.3B from -$7.9B originally reported), consumer borrowing rebounded in September, rising by +$6.9B (consensus was for no increase). For the third quarter as a whole, consumer credit rose +1.25% annualized, with revolving credit growing at a 2.5% annualized pace, and non-revolving credit rising at a more restrained +0.5% annualized rate for the quarter.
Non-Revolving credit rose $5.9B in September, after falling -$6.6B the prior month. This is in spite of the decline in auto sales (-27% YoY in September), and a rise in car loan interest rates of over 100bp from the prior month, increasing from 5.11% to 6.24%. Revolving debt, also known as credit card borrowing, rose by $1B in September, after rising +$0.3B in August. Consumer credit data does not include mortgage debt.
The latest survey on bank lending by the Fed showed considerable tightening in credit approvals for new consumer debt. The increase in new consumer debt, as the economy slows, is a concern, and confirms that many are unable to tap savings to fund spending, but are having to borrow to fund everyday necessities.
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