NEW YORK (MainStreet) Consumer confidence could be on the upswing as people were spending more during the third quarter.
The average balances for student and auto loans at the close of the third quarter had increased 10.6% since the second quarter, according to the loan data of nearly 1 million Americans from Hearst-owned account management service Manilla.com. Meanwhile, the average total debt held by users across the nation decreased by nearly 1.2%, in line with declining mortgage rates and economic improvement.
"While the movement in debt balances from the first quarter through the third quarter does point to growing economic confidence of Manilla users, it is unclear if this momentum will be sustained through the fourth quarter in the face of current realities," said Jim Schinella, CEO of Manilla, a free and secure service which allows consumers to manage their bills and other personal accounts on desktop, tablet and mobile devices.
The national average student loan balance was $13,951.57 at the close of the third quarter, versus $12,814.54 at the close of the second quarter. The average loan payment also increased during this time period from $122.64 to $125.10, further pointing to growing consumer confidence as Americans are becoming increasingly comfortable with paying off larger portions of their loans.
Auto loan balances are also continuing to rise, showing a 21% increase since the close of 2012, with an average balance of $14,738.95 this quarter. This is a strong indicator that Americans are willing to spend more on cars this year, pointing to economic improvement, he said.
It is unclear if the momentum built during the third quarter will be sustained through the fourth quarter with the current economic situation, said Schinella.
"While analysts have predicted that consumers will likely spend less this holiday season, we predict they'll also be likely less likely to pay off significant amounts of their loans as they book trips for the holidays and purchase gifts for loved ones," he said.
Student loan balances rose just under 9% in the third quarter and can be partially attributed to the start of a new school year and to people being more comfortable taking on debt, Schinella said.
One positive aspect is that more borrowers are paying more of their loans off with each payment, which points to growing consumer confidence in the third quarter, he said.
"Americans were more comfortable devoting more of their disposal income to paying off their debt, rather than only paying the minimum and saving the rest as a rainy day fund, Schinella said.
Many consumers will likely stick to their budgets for the holiday season, said Gail Cunningham, spokesperson for the National Foundation for Credit Counseling.
"As consumers enter the holiday season, they have good reason to be cautious with their spending," she said. "Many have worked hard to find a degree of financial stability, thus the many economic uncertainties existing today may cause them to retrench."
Consumer confidence appears to remain weak, said Jeff Golding, CEO of WilliamPaid, a Chicago-based company which allows people to build credit through paying their rent online.
"People are more conscious of their spending habits because they are constantly being reminded of it," he said. "I don't think the consumer confidence is there yet, especially after the government shutdown. The job market is still shaky at best and people tend to be more conservative with their spending when unemployment is high. It will be interesting to see what happens in the fourth quarter. It looks as though people are concerned about spending this holiday season."
Erin Lowry, 24, a New Yorker and founder of the blog Broke Millennial, said consumers can save some money this season by doing a gift swap or secret Santa with a large group of friends or a big family instead of buying individual gifts for everyone.
Some consumers will need to pick up some extra cash to subsidize their income this holiday season. Starting a side gig could help alleviate the added burden.
"A side gig could range from babysitting to freelance writing, tutoring or harnessing your talents to create a product worth selling," she said.
--Written by Ellen Chang for MainStreet