Consumer borrowing fell in September by the largest amount since the recession of the early 1990s, weakened by a huge drop in auto loans.
So I'm wondering, is this a good thing or a bad thing?
Here's what causes me to be conflicted.
The Federal Reserve reported Tuesday that borrowing declined at an annual rate of 0.6 percent in September, compared with a 4.6 percent rate of increase in August. Borrowing fell by $1.2 billion in September — the biggest drop since a $1.78 billion decrease in April 1992.
So, people aren't going into debt as much. That's good for some, bad for others.
Borrowing for auto loans slipped at an annual rate of 3.2 percent in September, reversed from an increase of 3.5 percent the previous month. September loans in that category dropped by $4.05 billion, the largest fall since the $4.81 billion decline in October 1991.
It figures that borrowing for vehicles would drop as auto sales slowed.
The overall economy has lost momentum due to the housing slump. The struggling auto industry slashed jobs last month, as did companies involved in home building, furniture making and real estate — casualties of the souring housing market.
The same is happening in the ancillary housing industries. But we still aren't stuffing cash under our mattresses.
By contrast, the Fed report showed that borrowing in the category that includes credit cards rose at an annual rate of 4.0 percent in September. That was more anemic than the gain of 6.7 percent in August, however.
Both of those increases were below the double-digit gains in May and June, months in which economists believe consumers were using their credit cards as a way to cope with soaring energy prices.
But my bet is that the slower borrowing trend could very well just be consumers taking a breath before the holiday season hits with both barrels.
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