Consumer Debt Rises Only 1% in September

American consumers dramatically slowed their accumulation of new debt in September, adding only $606 million in what analysts said reflects caution about buying cars and other expensive items.

The Federal Reserve Board reported Tuesday that consumer credit increased at a seasonally adjusted annual rate of just 1% in September, down from a revised 4.6% rate of advance in August. For all of 1988, consumer credit has increased 8.5%.

August’s net debt increase totaled $2.66 billion, a sharp revision from the $3.48 billion originally reported last month.

The pace of net borrowing in September was the second slowest of the year after an actual decline of 0.9% in July. That was the first drop since January, 1987, when consumer debt fell 3.4%.

Consumer spending is closely monitored as a gauge of the economy’s health because it represents two-thirds of all economic activity. The economy, particularly housing and manufacturing, has become sluggish in recent months in response to the Fed’s campaign to restrain growth and ease inflationary pressures by keeping interest rates relatively high.

Auto loans, which had dropped sharply in July, rebounded a bit in August, driven by end-of-model-year sales incentives and higher prices for 1990 models to come. The August sales had the effect of stealing from those ordinarily expected in September.

As a result, auto loans in September dropped $842 million, a 3.5% annual rate of decline, the Fed said.