US consumer credit growth below forecast in October
Americans turned cautious in spending before the beginning of holiday season. The latest consumer spending data for October 2015 shows the slowdown in consumer credit growth. The consumer credit growth was less than forecast for the month.
Student and auto loans contribute the most to the consumer spending growth. Revolving credit growth was almost flat. The latest data reflects the ongoing uncertainty about the US economy. The US consumer spending contributes over 70 percent to the US economy output.
The consumer credit reflects all debt besides mortgages. The outstanding consumer credit rose $15.98 billion or 5.5 percent annual rate in October, according to the US Federal Reserve.
On annual rate basis, the consumer credit growth in September was 9.9 percent and 5.1 percent in August. The latest data suggests caution approach by Americans as the holiday shopping season starts.
Economists in a survey carried out by The Wall Street Journal (WSJ) predicted $20 billion rise in October. But, the real growth in consumer credit was $15.98 billion below the forecast. Indicating spending through credit cards, the revolving credit was almost flat with annual rate of 0.2 percent, smallest gain since February. The revolving credit growth grew significantly 8.7 percent in September.
The credit card spending was almost remained at $200 million for October. Economists predict that consumer spending will be more in a healthy manner in the months to come. There's decreasing tendency of using borrowed money for daily shopping and emergency expenses, finds the data.
US News reported that auto and student loans contributed the most to the consumer spending growth in October. Americans preferred to opt for debt on fees paying for college or university studies and buying vehicles. Americans are willing to borrow for enhancing their skill set and employment opportunities.
The personal spending in the US households rose 0.1 percent in October, according to the US Commerce Department. The recent jobs data showed encouraging growth in employment and surge in wages as well. It's estimated that 211,000 jobs were added in November as against 298,000 in October, according to the US Labor Department.
As per a report published by CNBC, the US consumer credit grew by $16 billion to $3.5 trillion in October. The borrowing growth was $38.5 billion in September. Economists hold strong view on positive auto and home sales in 2015 will pave the economic growth in early 2016 as well.
Non-revolving credit comprising auto finance and student loans rose 7.4 percent in October less than 10.3 percent in September. The consumer data is indicating undercurrent uncertainty about the economy as Americans are more cautious in spending.
Now, all eyes are on the forthcoming meeting of the US Federal Reserve. The Fed officials anticipate the rise in borrowing costs for the first time in the past decade. The slowdown in consumer spending even ahead of shopping season is expected to be a drag on economic growth in the fourth quarter of 2015. The consumer spending accounts for two-thirds of economy output in the US.