Americans took on a record $10.6 billion more in consumer debt than they paid off in September as borrowing for auto purchases hit an all-time high, the government reported Wednesday.
The Federal Reserve said the September debt growth compared to a $6.3-billion increase in August and surpassed the old record of $9.09 billion in May, 1984.
The bulk of the increase came from a $7.4-billion jump in auto loans as consumers took advantage of attractive cut-rate financing offers. The previous record monthly increase in the auto category was $3.8 billion in May of this year.
The changes left the ratio of consumer debt to disposable income at a high of 19.2%. Analysts said this record debt burden is likely to put a damper on consumer spending in the months ahead.
Already, auto sales have dropped off sharply in October, and many analysts believe that the retail sales number due to be released today will also show weakness.
"The consumer is overextended given the current economic conditions," said Sandra Shaber, an economist at Chase Econometrics. "Consumer demand isn't going to collapse, but it certainly is going to slow down sharply from what we had in the first nine months of the year."
Shaber said a primary reason for the slowdown has been the weak personal income growth of recent months.
The credit report showed these other changes:
- Cash loans from banks and other short- and medium-term personal debt rose by $2.54 billion in September, below the August increase of $2.68 billion.
- The category including credit card debt rose by $461 million in September, down from an August increase of $936 million.
The various changes left total consumer debt outstanding at a seasonally adjusted $522.7 billion at the end of September.
The September advance represented debt growth at an annual rate of 24.9%, compared to rates of growth of 15% in both August and July. For the July-September quarter, consumer debt grew at an annual rate of 18.6%, down from a 20.8% pace in the first half of the year.