Consumer borrowing up $9.8 billion

By Vincent Del Giudice, Bloomberg News

U.S. consumers increased borrowing more than expected in September as credit card use rebounded, a government report showed.
Non-mortgage borrowing rose by $9.8 billion, or 5.8 percent at an annual rate, after a revised gain of $2.2 billion in August, the Federal Reserve said in Washington.

Job growth in August and September was faster than initially reported, the Labor Department said Friday, giving consumers the wherewithal to spend. U.S. employers added 337,000 workers last month, the most since March and almost twice as many as forecast.

"The outlook for consumer spending is much brighter today after the good news that many more Americans have found jobs in this recovery period than previously thought," said Chris Rupkey, an economist at Bank of Tokyo Mitsubishi in New York. "This could be the brightest Christmas for retailers in several years."

The median forecast called for an increase of $7 billion, according to a Bloomberg News survey of 38 economists. Estimates ranged from gains of $3.5 billion to $11 billion. The Fed's preliminary estimate of August credit showed a $2.4 billion drop.

The U.S. Treasury's 10-year note fell after the jobs report fueled expectations that the Fed will soon raise borrowing costs. The yield rose 11 basis points to 4.18 percent in New York.

Revolving credit, which includes credit cards, rose $6.2 billion after falling $2.1 billion in August. Non-revolving credit, which includes car and mobile-home loans, rose $3.7 billion in September after rising $4.3 billion the previous month.

U.S. auto sales rose 10 percent in September, led by a 25 percent gain at General Motors Corp. and gains for DaimlerChrysler AG and Toyota Motor Corp., industry data show. GM had its biggest gain in two years after rebates helped clear dealer lots.

American Express Co., the fourth-largest U.S. credit-card issuer, said Oct. 25 quarterly profit rose 14 percent to a record as customers spent more on travel and had larger loan balances.

Consumer spending nationwide rose three times as much as incomes in September, suggesting families dipped into savings, according to Commerce Department statistics. September's savings rate fell to the lowest since October 2001.

In the months ahead, consumers may "pull back on the amount of credit they assume," because of high oil prices, said Richard Yamarone, an economist at Argus Research Corp. in New York.

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