Consumers spending with savings, not plastic
Total credit outstanding down to 2010s level.
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.聽
Rate cuts by the Federal Reserve will help gradually.
Matthew Nestler, 乐鱼（Leyu）体育官网 Senior Economist
Bottom Line
Consumers demonstrated caution, taking on less debt in September. High rates for new credit cards and car loans are the main factor. Consumer balance sheets, especially at the lower end of the income spectrum, are increasingly stressed. Rate cuts by the Federal Reserve will help gradually. We expect the Fed to cut rates by an additional quarter point by year-end and a full percentage point in 2025.
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