US consumer borrowing jumps on surge in credit-card balances
US CONSUMER borrowing increased in October by more than forecast, reflecting the largest advance in credit-card balances since mid-2022.
Total credit outstanding rose US$19.2 billion after a revised US$3.2 billion September increase, according to Federal Reserve data released on Friday (Dec 6). The median estimate in a Bloomberg survey of economists called for a US$10 billion gain. The figures are not adjusted for inflation.
Revolving debt outstanding, which includes credit cards, surged US$15.7 billion. October included Amazon.com’s Prime Day, as well as similar promotions at Walmart and Target.
Non-revolving credit, such as loans for vehicle purchases and school tuition, increased US$3.5 billion, the Fed’s report showed. The pace of auto sales during the month was the strongest in more than three years, according to Ward’s Automotive Group data.
While the Fed has lowered its benchmark rate by 0.75 percentage point since September, it will take time to filter through into cheaper financing costs for consumers.
While rising incomes have allowed many consumers to manage the high cost of borrowing, many lower-income Americans are experiencing greater financial strain. Fed chair Jerome Powell alluded to that earlier this week, noting that aggregate US economic data look good but there’s pressure in lower-income brackets.
A New York Fed report in November showed that 3.5 per cent of outstanding consumer debt was in some stage of delinquency in the third quarter, up from 3.2 per cent in the previous three-month period. The share of auto loans that transitioned into serious delinquency, meaning payments were at least 90 days late, rose to 2.9 per cent. BLOOMBERG
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