Show Entire Article
Consumers slashed their borrowing in July by the largest amount on record as job losses and uncertainty about the economic recovery prompted Americans to rein in their debt.
Economists expect consumers will continue to spend less, save more and trim debt to get household finances decimated by the recession into better shape. Such behavior, though, is a recipe for a lethargic revival, because consumer spending accounts for 70 percent of economic activity.
The Federal Reserve reported Tuesday that consumers in July ratcheted back their credit by a larger-than-anticipated $21.6 billion from June, the most on records dating to 1943. Economists had expected credit to drop by $4 billion.
July’s retreat translated into an annualized decline of 10.4 percent. That followed a cut of $15.5 billion in June, or a 7.4 percent annualized drop, and was the most since a 16.3 percent decline in June 1975.
The latest cut still left total consumer credit at $2.47 trillion.
Wary consumers and hard-to-get credit both factor into the scaled-back borrowing. But economists are split on which force — lack of demand by consumers or lack of supply from banks — is having the bigger influence.
Page 1 of 4 | Next PageShow Entire Article
More Top Stories