Rise in Consumer Debt Is Slowest in 10 Months

Americans took out $1.88 billion more in consumer debt than they paid off in September, the smallest advance in 10 months, the government reported Monday.

The Federal Reserve said the September increase in consumer debt was down from an August rise of $5.32 billion and was the smallest monthly advance since a $1.79 billion rise in November, 1987.

While much of the decline in September was traced to weak auto sales, economists said the pattern of the past several months showed that consumers had grown more cautious in their buying plans.

From July through September, consumer debt rose at an annual rate of 6.75%, down significantly from a 10.2% growth rate in the first six months of the year.

“Consumer debt in the third quarter grew at one of the slowest rates of this recovery,” said Michael Evans, head of a Washington forecasting firm. “There are increasing signs that consumers are becoming more cautious as they cut back on spending and try to reduce their debt loads.”

Consumer spending accounts for two-thirds of all economic activity. Evans said the consumer slowdown is a primary reason he is looking for economic growth next year to be less than half of this year’s pace.

Auto Loans Up

The overall economy, as measured by the gross national product, is expected to rise by 3.8% this year, the best performance since 1984. Evans predicted that 1989 growth would be a lackluster 2%.

For September, auto loans edged up a modest $49 million following a $2.2-billion increase in August. The big drop in auto loans reflected the absence of widespread auto sales incentive programs, the government said.