Consumer borrowing falls by record amount
WASHINGTON -- Consumer borrowing plunged in October by a record amount, reflecting a big drop in auto loans.
The Federal Reserve reported Wednesday that Americans' borrowing fell by $7.2 billion at an annual rate in October, the biggest amount ever in dollar terms, including a record drop of $5.6 billion, at an annual rate, in the category that includes car loans.
The dollar declines translated into a drop of 4 percent in overall borrowing, the biggest percentage setback in nearly 15 years, and a decline of 4.9 percent in the category that includes auto loans, the biggest percentage drop in 13 years.
The big drop took analysts by surprise. They had been expecting that consumer spending would rise at an annual rate of $5 billion in October.
While retailers are reporting a mixed start to the holiday shopping season, analysts cautioned against reading too much into the one-month falloff in consumer credit.
"This is a pay back for the aggressive discounts consumers were offered to buy cars during the summer," said Mark Zandi, chief economist at Moody's Economy.com.
Americans are shouldering record-high levels of consumer debt and personal savings rates have fallen to record lows, but analysts said consumer spending, which accounts for two-thirds of the total economy, should continue rising even if the pace slows a bit.
"I have full faith in the ability of the American consumer to keep spending," said David Wyss, chief economist at Standard &; Poor's in New York.
The 4 percent drop in consumer credit followed a 2.2 percent increase in September while the 4.9 percent drop in auto loans and other non-revolving credit followed a 1.1 percent decline in September. These loans had shot up by 6.2 percent in August as consumers responded to attractive incentive offers.