October Consumer Debt Up as Spending Pace Quickens

Americans took out $3.56-billion more in consumer debt than they paid off in October, reflecting a rebound in consumer spending, the government said Wednesday.

The Federal Reserve said the October increase followed a tiny $2-million rise in debt during September, the smallest change in six years. Consumer credit fell by $81 million in October, 1982, at the bottom of the last recession.

October’s rise, which translated into credit growth at an annual rate of 6.5%, was still down from the 8.75% annual rate of growth in the first nine months of 1988.

Still, analysts said they believed that consumer spending was strengthening after a period of sluggishness. They noted that retail sales shot up 0.9% in October, the biggest gain in seven months.

“The latest numbers suggest that consumers are a little more optimistic about buying,” said Michael Evans, head of a Washington consulting firm. “I think they are not fighting higher prices as much as they had in the past.”

Consumer spending accounts for two-thirds of overall economic activity. New-found strength in the consumer sector has prompted some analysts to boost their projections for growth in the current October-December quarter.

The $2-million advance for September represented a sharp revision from the original report a month ago that had put the rise in consumer debt at $1.88 billion. Fed officials said new data showing weaker activity in car sales accounted for much of the change.

Auto loans rose by $1.32 billion in October after falling by $779 million in September. The poor showing in September was blamed on an absence of sales incentive programs that have boosted demand at the end of previous model years.

The category that includes credit card debt rose by $2.17 billion, up from a $1.1-billion increase.

Bank and credit union loans not secured by real estate rose $178 million in October. They fell $158 million in September.