U.S. consumer borrowing rose in October to the highest mark in two years, led by gains in non-revolving debt such as auto and student loans.
Credit increased by $7.65 billion to $2.46 trillion, the most since October 2009, according to G.19 data the Federal Reserve Board released Wednesday.
The data indicate consumers are relying more on credit to sustain spending as income gains fail to keep up with inflation and home prices drop. At the same time, rising employment may be making Americans more willing to take on more debt heading into the holiday shopping season.
Revolving credit, 98% of which is credit card debt, also was up in October to $792.3 billion, a 04% increase from $790 billion in September.
The higher card balances could be a harbinger of heavier credit card use over the holidays, one expert suggests. The one-month increase is “not enough to reverse the trend” of consumers generally relying less on credit, but it could be good news for issuers, says Dan Geller, senior vice president at San Anselmo, Calif.-based Market Rate Insights Inc.
“Certain retailers also reported higher sales and foot traffic in November, and it’s likely that some of that spending went onto credit cards,” Geller says.
Revolving debt generally has declined over the past two years as consumers increasingly have paid down credit card balances and steered away from taking on fresh debt following the recession, economists say.
Consumers continue to be cautious in their spending as the economy slowly recovers, Geller says.
“The increase in October shows a bit of a change in consumers’ credit behavior, but we will have to wait to see if it’s just seasonal,” he says.
