Consumers spending with savings, not plastic

November 7, 2024

For the second month in a row, consumers have shown reluctance to take on more debt due to higher interest rates. Consumer credit rose just 1.4% in September at a seasonally adjusted annual rate. The August data were revised down to 1.8%.

Total credit outstanding increased by $6 billion, less than half the expected total of $14.5 billion. The three-month moving average increased to $13.7 billion in September. That is little changed from the 2010s average of $13.6 billion. On an annual basis, consumer credit outstanding rose 2.2%, slightly below August's level.

Revolving debt, which is primarily made up of credit cards, rose 0.9% in September at an annual rate; it fell in August. Retail sales grew in September, supported by higher savings rates, increased consumer confidence and big-box store discounts. Consumers are choosing to spend savings rather than taking on more credit card debt. Rates for new credit cards have nearly reached 22%.

Nonrevolving debt, which includes car loans, student loans and personal loans, rose at an annual rate of 1.6% in September. That declined in the previous three months, showing falling demand. High rates on new car loans are suppressing demand, especially in lower- and middle-income households.

This series for consumer credit does not adjust for inflation. As inflation nudged higher month-over-month in September, real consumer credit outstanding declined slightly, by -0.08%, for the second month in a row.