Consumer borrowing posts rare gain

WASHINGTON – Consumer borrowing increased in September for the first time since January even though the category that includes credit cards dropped for a record 25th straight month. The rise in credit came from the category that includes student loans.

The Federal Reserve said Friday that consumer credit increased at an annual rate of $2.1 billion in September after having fallen at a rate of $4.9 billion in August. It was only the second increase in the past 20 months.

Americans have been reducing their borrowing for nearly two years as they try to repair their balance sheets in the wake of a steep recession and high unemployment.

For September, revolving credit, the category that includes credit cards, fell for a record 25th consecutive month, dropping by an annual rate of $8.3 billion, or 12.1 percent.

The category that includes student loans and auto loans rose by $10.4 billion, or an annual rate of 7.9 percent. The data from the Federal Reserve showed a large increase in lending by the federal government for student loans in September.

This growth has come as a result of a law passed by Congress that makes the government the primary lender to students, rather than a guarantor backing private loans.

The $2.1 billion rise in overall borrowing in September pushed consumer debt to a seasonally adjusted $2.4 trillion in September, down 2.9 percent from where consumer credit stood a year ago.

Analysts said that consumer credit is continuing to be constrained by all the problems facing households, including high unemployment and tighter lending standards on the part of banks struggling with high loan losses.

But Theresa Chen, an economist at Barclays Capital Research, said that while the big declines in consumer credit were probably coming to an end, any growth in this area would be moderate because of continued large charge-offs by banks and continued tight lending standards.