US consumer credit down as appetite for debt diminishes
TOTAL US consumer credit fell by a greater-than-expected $11.98bn (£7.5bn) in August, according to Federal Reserve data released yesterday, suggesting consumers are opting to cut their debt rather than spend.
Analysts said the drop, the seventh consecutive monthly decline, was unsurprising given the high level of unemployment, and was further confirmation that consumers would not be leading the economy’s recovery from the worst recession in 70 years.
August consumer credit outstanding dropped at a 5.81 per cent annual rate to $2.46 trillion, the US central bank said. A panel of analysts undershot the figure, forecasting a $10bn fall.
July’s figures were revised to show an $18.98bn drop, previously reported as a record $21.6bn decline.
“This is the clearest evidence of consumer deleveraging that we have. Consumers are actively saving more, borrowing less and paying back their credit card balances and other debt,” said Zach Pandl, an economist at Nomura Securities International in New York.
Pandl added: “This is a positive thing in the long-run, but in the short term it is negative for growth. People spending less means demand will be weaker and employment will be weaker.”