Fed: Card balances rise for 7th straight month

Consumers' revolving debt balances grow 8.7 percent in September


Consumers continued to use credit cards and added substantially to the nation's revolving debt balance in September, the Federal Reserve said Friday.

The revolving debt balance -- primarily composed of credit card balances -- reached $925.2 billion, an increase of about $6.7 billion, according to the Federal Reserve's monthly G.19 report on consumer credit. This is the highest month-over-month such increase since April 2015, and leaves card balances at the highest level since November 2009. The annualized growth rate now rests at 6.5 percent.

Total student loan debt is now approximately $1.3 trillion, according to the Fed report, a $30.2 billion increase since June, the last time these debt figures were measured. Outstanding auto loan debt totals about $1.03 trillion, an increase of $31.5 billion since June.

Overall, total consumer debt rose $28.9 billion in September to about $3.5 trillion -- an annualized increase of 10 percent. This balance includes car loans, student loans and revolving debt, but excludes mortgages, so it represents the short-term credit obligations consumers hold in a given month. All figures are seasonally adjusted to account for expected fluctuations.

Despite consistently rising card balances, total spending increased by only $15.6 billion (0.1 percent) in September, according to the Commerce Department. This increase is substantially less than the $44.2 billion (0.4 percent) spending increase recorded in August.

Positive savings habits prevail. Consumers put away $642.8 billion (4.8 percent of disposable income) in September compared to $637.3 billion (4.7 percent of disposable income) in August.

Employment figures support December rate hike
On top of increasing consumer card use in September, the pace of hiring increased dramatically in October.

According to the Labor Department, 271,000 jobs were created in October, well above the 190,000 jobs economists predicted and the strongest growth since December 2014, according to a Bloomberg consensus report.

"At last, a payroll report which makes sense," said Ian Shepherdson, chief economist at Pantheon Macroeconomics. After two months of relatively weak employment figures amid reports of healthier economic data, "this is consistent with all the advance indicators," he told the New York Times

The unemployment rate has also now dipped down to 5.0 percent, the lowest since April 2008, based on Bureau of Labor Statistics historical data.

Adding even more positivity to the report, average hourly earnings for all employees also rose in October, increasing by 9 cents to rest at $25.20 after a slight decline in September. Over the year, average hourly earnings have increased 2.5 percent.

These encouraging employment figures follow Fed chairwoman Janet Yellen's comment earlier this week that the U.S. economy is "performing well" and "it could be appropriate" to start raising benchmark interest rates at the next Federal Open Market Committee in December.

The central bank had once again postponed a rate increase in October based on ongoing concerns about labor market recovery and low inflation. Core inflation, which measures price stability of commodities except food and energy products, still remains below the 2 percent threshold the FOMC would like to see, currently resting at 1.89 percent.

However, many economists still believe the new employment figures support a December rate increase. In fact, "Bring on that rate hike!" is how Bloomberg Business began its latest employment consensus report.

Ralph Piscitelli, economist for The Conference Board, called the jobs report "fantastic" and believes "today's numbers provide more confirmation that the U.S. economy is not slowing down in the short term, thanks primarily to the consumer," according to a statement. Strong consumer spending, which rose 3.2 percent in Q3, helped offset negative effects that factor into real GDP such as a strong dollar and low oil prices, according to the Commerce Department.

The Fed is expected to review rate hike plans at the last FOMC meeting of the year Dec. 15-16.

See related: Most banks invisible on Federal complaint website, Quick tip video: What are variable interest rates?

Published: November 6, 2015

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Updated: 10-26-2016

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