Consumer Borrowing Rises to $2.75 Trillion

The agency said consumers increased their borrowing by $14.2 billion in October from September. Total borrowing rose to a record $2.75 trillion.

Borrowing in the category that covers autos and student loans increased by $10.8 billion. Borrowing on credit cards rose by $3.4 billion, only the second monthly increase in the last five months.

The increase in borrowing came in a month when Americans cut back on consumer spending, reflecting in part disruptions from Hurricane Sandy.

Many consumers may also have scaled back because of fears about the automatic tax increases and spending cuts that will take effect in January if Congress and the Obama administration fail to reach a budget deal by then.

Consumer spending drives about 70 percent of the nation’s economic activity.

Economists think that it could bounce back. But the underlying trend remains weak because with unemployment remaining high, households don’t have the income to spend.

Consumers are also signaling concern. A survey of consumer sentiment, the Thomson Reuters/University of Michigan survey, fell sharply in December, economists noted, partly over worries that taxes could rise next year.

Many consumers have been reluctant to build up credit card debt, which typically carries steeper interest rates than other loans.

Credit card use has fallen sharply since the 2008 credit crisis. Four years ago, Americans had $1.03 trillion in credit card debt. In October, that figure was 17 percent lower.

During the same period, student loan debt rose. The category that includes auto and student loans is 22 percent higher than in July 2008. That reflects in part the decision by many Americans who have lost jobs to return to school to get training for new careers.

Article source: http://www.nytimes.com/2012/12/08/business/economy/consumer-borrowing-rises-to-2-75-trillion.html?partner=rss&emc=rss