Credit Balances, Fueled More by Auto and Student Loans, See Record Monthly Surge

The biggest component of an economic recovery is increased consumer spending, and that’s why the latest update from the Federal Reserve on credit balances is considered a big positive.

Americans’ loan debt — not including mortgages and equity lines of credit — jumped by $28.91 billion in September, or 10 percent at an annualized rate, and that’s much more than Wall Street was forecasting.
It’s also a monthly record (not adjusted for inflation), fueled mostly by increased borrowing on cars and trucks, and college tuition via student loans. The Fed has kept a tally on consumer credit since 1941. But loans secured by real estate are not included in the monthly updates.
September’s borrowing followed a gain of $16 billion in August, lifting total consumer credit borrowing to an all-time high of $3.5 trillion.
Revolving credit, essentially purchases made on credit cards, totaled $925.2 billion of this at the end of September, recording an increase at an annual rate of 8.7 percent.
Nonrevolving credit composed of mostly car loans and borrowing for college, recorded a jump at an annual rate of 10.5 percent. Auto loans, which are configured quarterly, totaled $1.03 trillion at the end of the third quarter, up from $998.1 billion at the end of second quarter. Student loans outstanding totaled $1.303 trillion at the end of the third quarter. That’s up from $1.273 trillion at the end of second quarter.
Over the last few years, consumer credit has been expanding about a little over 5 percent per month, following a significant downturn in following the 2007-2008 financial crisis and subsequent recession.
All in all, it’s good news for the economy for now — at least until, or if, consumers become overburdened by debt and high loan balances spurs a pullback in spending.

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