Consumer Borrowing Rose In October

Date: December 09, 2015

US Consumer Debt Total Now $3.5 Trillion, But Borrowing Slowing

According to the latest Federal Reserve data, in October US consumer borrowing rose by $16 billion, bringing the total US consumer debt load to $3.5 trillion. The AP reported that “the pace of borrowing decelerated sharply” from September’s $28.5 billion increase. Pointing out that most of the October rise “came from the category that covers auto and student loans,” the AP said the increase “suggests that more Americans are borrowing to improve their educational skills and upgrade their cars and trucks, instead of relying on debt to fund their daily shopping and emergency expenses.” Credit card borrowing during the month “edged up a mere $200 million.”

Investor’s Business Daily reported that weaker-than-expected credit card data spells bad news for lenders like Visa and MasterCard, as well as JPMorgan Chase, Bank of America, and Citigroup. According to the central bank’s report, consumer credit in October was expected to rise $20 billion, following the outsized surge of $28.6 billion in September. Banks “have been rallying on hopes that Fed interest rate hikes will boost net interest margin,” however “they are also big credit and debit card issuers.” The Wall Street Journal also covered the Fed data, saying it underscores economic uncertainty surrounding the central bank’s December policy meeting amid expectations officials will raise rates for the first time in nearly a decade.

What This Means For Small Businesses

US consumers appear to be continuing their trend of being wary to increase spending. This echoes the latest NFIB Small Business Optimism Index, which found that small business owners are also showing growing wariness of borrowing. NFIB Chief Economist William Dunkelberg explained, “Loan demand remains historically weak, owners can’t find many good reasons to borrow to invest when expectations for growth are not very positive.” A weakening credit environment may signal an overall economic slowdown headed into the new year.

Additional Reading

24/7 Wall Street also covered the latest data.

Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.

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