The pace of U.S. consumer borrowing fell steeply in October, reflecting a steep drop-off in the use of credit cards as the pandemic and efforts to stem its resurgence cut into consumer spending.

Total credit rose by $7.2 billion in October from the month prior, falling far short of the $17 billion expected by analysts surveyed by Econoday.  The figure was just half of the bottom of the range of forecasts.
September’s figure was revised to show a $15 billion expansion, down from the initial estimate of $16.2 billion.

Total consumer credit for the month rose an annualized 2.1 percent after growing at a 4.4 percent pace in September. Consumer credit contracted an annualized 5.6 percent in the second quarter as major parts of the economy were shuttered to fight the virus.

Outstanding credit card debt fell $5.5 billion as retail sales stalled and consumers pulled back from some of the big spending that had gone on over the summer. Revolving credit fell 6.7 percent for the month, from $985.1 billion to $979.6 billion, the seventh decline in eight months.

Drops in revolving credit usage, mostly in the form of credit card spending, can indicate waning consumer confidence. As well, restrictions on restaurants and other venues may be holding back spending and the use of credit cards.

It may be some American households are keeping credit cards tucking in wallets and instead spending down savings accumulated during the year, largely because many ordinary channels of spending—such as dining out, travel, movies, sporting events, and concerts—have been canceled or curtailed.

The revival of lockdowns and government restrictions on a variety of activities are likely to put further pressure on consumer spending and credit use, according to most analysts. The surge of Covid cases and deaths could hold back spending by many Americans wary of becoming infected, particularly among older Americans who ordinarily spend more than they earn and serve as net income contributors to the rest of the economy.

Progress in the labor market has stalled. Jobless claims, a proxy for layoffs, are rising and the Labor Department’s jobs report on Friday revealed the economy generated far less employment growth than expected. The extraordinary government support for the unemployed has run dry, leaving millions of jobless Americans to rely on state jobless benefits that typically pay only half the income earned by workers. That leaves those workers with far less to spend and can even induce employed people to pull back on their spending in order to save to cushion possible future job losses.

Non-revolving debt, which includes auto and school loans, rose by $12.7 billion. Federal government lending increased by $4.5 billion, likely due to student loan lending and student loan forebearance.

The Fed’s measure of consumer credit does not include mortgage debt.