Rising credit debt a signal

September's $6.9b increase points to economic slump

WASHINGTON - Borrowing by US consumers rose in September, reversing the biggest drop on record, according to statistics from the Federal Reserve.

Consumer credit rose $6.9 billion, or 3.2 percent at an annual rate, to $2.59 trillion, the Fed said yesterday. In August, credit fell by $6.3 billion, the most since records began in 1943.

Looking beyond the month-to-month volatility, the figures have started to reflect the freeze in lending that is forcing consumers and businesses to retrench. The loss of 1.2 million jobs this year is darkening the outlook, underscoring forecasts that the economy is heading toward the worst slump in decades.

"Credit is hard to get and is going to get even harder to obtain in the future," said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York.

Economists forecast consumer credit would be unchanged in September, according to the median of 32 estimates in a Bloomberg News survey. Borrowing is up an average of $2.7 billion a month since July, compared with a gain of $9.8 billion per month from January through June.

The Fed previously estimated a $7.9 billion drop in August. The report doesn't cover borrowing secured by real estate.

Revolving debt, such as credit cards, rose $954 million in September. Nonrevolving debt, including auto loans, rose $5.9 billion, according to Fed statistics.

In a report issued Monday, the Fed said a record share of US banks made it more difficult to get loans over the past three months. The quarterly Senior Loan Officer Survey said: "Large fractions of domestic banks again reported tightening standards on both credit card and other consumer loans."