US consumer borrowing unexpectedly fell in September for the 1st time in 6 months, as US citizens took fewer auto loans and their spending on gasoline declined.
According to Federal Reserve, borrowing witnessed an annual decline of 0.6% in September 2006, compared to 4.6% rise in August. There was a US$ 1.2 Million drop in borrowing, highest since April 1992, when borrowing fell by US$ 1.78 Billion.
Central bank has blamed a considerable decline in loans taken for boats, cars, holidays, and education expenses. However, credit card loan was one item that saw an annual increase (4%) in September but slowing down from growth seen in August (6.7%).
Revolving credit, meanwhile, rose by US$ 2.85 Billion, seeing an annual increase of 4% to reach US$ 857 Billion. Non-revolving credit (like car & boat loans) declined by US$ 4.05 Billion, witnessing an annual decline of 3.21% to reach US$ 1.5 Billion. The decline is highest in almost 15 years, when non-revolving credit dropped by US$ 4.81 Billion in October 1991.
"Recent falls in gasoline & other energy prices should help spending by consumers in coming months, preventing USA from witnessing a complete downturn," said an analyst at RNCOS.
Fed is attempting to curb inflation without harming the economy, which grew at 1.6% in Q3 2006. Rising wages of Americans have resulted in decreased dependence on loans. Spending by consumers is helping US in overcoming a housing crash, thus, expanding economy at a rate, which Fed estimates to be 'moderate'.
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