By Nicholas Heinzmann
Consumer borrowing in the U.S. rose at the slowest pace in nine months in August following a drop in credit card spending, according to a report by the U.S. Federal Reserve.
Consumer credit rose by $13.5 billion, well below the economists’ consensus forecast of $20 billion, according to Bloomberg. That followed a downwardly revised $21.6 billion increase the month before.
Revolving credit, which includes credit card debt, fell $200 million, ending five straight months of gains.
Stagnant wage growth caused consumers to shy away from credit card spending in August. Consumers account for the largest sector of the economy and reluctance to borrow could put a drag on economic growth.
“With the recent jobs numbers you’d think people would be more willing to use credit,” said David Nice, an economist at Chicago-based Mesirow Financial. “But we haven’t seen relatively good wage growth. When you see better wage growth you see people using their credit cards as well.”
Employers added 248,000 jobs in September and the unemployment rate dropped to 5.9 percent, the first drop below 6 percent since the Great Recession, according to the Bureau of Labor Statistics. Private-sector wages, however, grew only 2.2 percent over the last year.
Contrary to credit card borrowing, non-revolving credit, which includes financing for cars and college tuition, continued to grow albeit at a slower pace. That segment of credit rose $13.8 billion, compared with the $16.2 billion increase in the previous month.
Demand for cars has continued to grow steadily. August auto sales surged to an annualized rate of 17.5 million, the strongest since the beginning of 2006, and September sales grew at a 16.3 million annualized rate, according to data provided by Ward’s Automotive Group.