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Consumers Borrow More, Defy Experts

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The Associated Press

Published: November 8, 2008

WASHINGTON - Consumers boosted their borrowing in September, defying expectations for a cutback.

The Federal Reserve's report, released Friday, says consumer credit increased at a 3.2 percent annual pace in September. That was up from a 2.9 percent rate of decline in August and marked the biggest increase since July.
Economists expected consumers trimmed their borrowing at a 0.5 percent pace in September.
Consumer debt rose by $6.9 billion in September from the previous month to a total of $2.59 trillion.

The Fed's measure of consumer borrowing does not include any debt secured by real estate, such as mortgage or home equity loans.

The pickup in September reflected an increase in demand for non-revolving credit used to finance cars, vacations, education and other things. That type of credit rose at a 4.4 percent pace, compared with a 4.9 percent rate of decline in August.

Consumers' appetite for revolving credit, which is primarily credit cards, increased at a rate of 1.2 percent in September, up from a 0.4 percent growth rate the previous month.

But for the July-September quarter as a whole, consumers pulled back sharply in their spending, a main reason why the economy contracted during that period, the government reported last week.

With jobs disappearing and Americans watching their wealth shrink, economists are expecting further retrenchment by consumers. That's factoring into predictions for more shrinking economic activity in the current October-December quarter.

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