Consumer borrowing increases

Banking on a student loan

More Videos

Quick Vote

How secure is your job?

• Very safe
• Safe, for the time being
• Not safe at all

or View results

Have job losses hit bottom?

More Videos

NEW YORK (CNNMoney.com) -- Borrowing by consumers increased in September after a pullback the previous month, according to a government report issued Friday.

The Federal Reserve reported that consumer borrowing increased by $6.9 billion in September to $2.588 trillion from a revised $2.581 trillion in August.

The annual rate of consumer borrowing rose by 3.2% last month. Credit card borrowing, or revolving debt, increased at an annual rate of 1.2%. Non-revolving borrowing, including student and auto loans, expanded by 4.4%.

Economists had expected that consumer borrowing would be flat with the previous month, according to a consensus estimate compiled by Briefing.com.

In August, consumer debt decreased by $6.3 billion. The fall in consumer credit in August was the first time it had declined since January 1998, and was largely due to a decrease in non-revolving lines of credit in the form of auto loans.

According to one analyst, the primary reason that the consumer borrowing data ticked up in September was a rebound from the decline in August.

"Consumer credit has - at least in modern times - very, very rarely declined," said Adam York, economic analyst at Wachovia. "This is just payback for the decline."

Given the current economic slowdown, York does not read this as a major turnaround.

"The trend is still clearly downward. Consumers are going to continue to cut back on their spending we think and, accordingly, there will be a reduction in credit use," he said.

In addition, York noted that it is critical to remember to read that this data is from more than one month ago.

"This is data from September and the credit crisis really picked up new steam in the first weeks of October," explained York. "This is lagging data. It does not tell the whole story."

The Fed's most recent survey of senior loan officers - from October, which was one month ahead of this report - found that banks reported tighter lending standards on consumer loans.

The October survey found 60% of respondents indicated that they had tightened lending standards on credit card loans, and almost 65% of respondents indicated that they had tightened lending standards on other consumer loans over the past three months.

"What will be more interesting will be the October and November months to see whether consumers are willing and able to continue to buy things on credit," said York.