Shoppers exercise less caution when spending

December 6, 2024

Consumers took on more debt in October, following two months of retrenchment. Consumer credit rose 4.5% at a seasonally adjusted annual rate.

Total credit outstanding increased by $19.2 billion. The three-month moving average fell to $9 billion in October due to the weakness in the prior two months. That is below the 2010s average of $13.6 billion. Consumer credit outstanding rose 2.3% year-over-year in October, slightly above September's rate.

Revolving debt, primarily made up of credit cards, jumped 13.9% in October, again on an annualized basis; it barely rose in September after falling in August.

Credit card usage grew even though interest rates for new cards have nearly reached 22%. Continued discounting and purchases ahead of the holiday season drove the gains. The silver lining is that incomes are outpacing debt, according to the New York Federal Reserve Bank.

Nonrevolving debt, which includes car loans, student loans and personal loans, increased at an annual rate of 1.1% after gaining 0.5% in September. Vehicle sales expanded in October, reflecting the strength of consumer balance sheets even as consumers became wary of taking on debt to finance car loans.

The data on consumer credit is not adjusted for inflation. Real consumer credit outstanding edged slightly higher by 0.18%, reversing two months of declines.