WASHINGTON (AP) - Americans
cut back on borrowing in July for the first time in nearly a year.
Credit card use fell for the second straight month, suggesting many
consumers remain cautious in the face of high unemployment and slow
growth.
Total consumer borrowing
dipped $3.3 billion in July from June to a seasonally adjusted $2.705
trillion, the Federal Reserve said Monday. It was the first decline
since August 2011. The drop in credit card debt offset a small rise in a
measure of auto and student loans.
The Fed also said Americans
have borrowed much more than previously estimated after it revised
consumer borrowing data back to December 2010. June's figure was
increased to $2.708 trillion, or $130 billion higher than initially
thought. It's also well above pre-recession levels.
Consumer debt declined even
though Americans boosted their spending in July by the most in five
months, according to government data released last week.
Still, the job market has
weakened substantially from the start of the year, which is keeping
downward pressure on spending. In August, employers added just 96,000
jobs, down from 141,000 in July and well below the average 226,000 jobs a
month in the January-March quarter.
Consumers have been using
credit cards much less since the 2008 credit crisis. Four years ago,
Americans had $1.03 trillion in credit card debt, an all-time high. In
July, it was $850.7 billion - or 17 percent lower.
During that same time,
student loan debt has increased dramatically. The category that includes
auto and student loans, along with other loans for items such as boats,
has jumped to $1.85 trillion from $1.56 trillion in July 2008.
Student loans totaled $914
billion in the April-June quarter, according to a separate report from
the Federal Reserve Bank of New York released two weeks ago. That's up
from $611 billion in the July-September quarter in 2008, an increase of
nearly 50 percent over the past four years.
Much of the increase in
student loans is a result of high unemployment, which has led many
Americans to seek better education and skills in a more competitive
labor market.
Student loan growth slowed
sharply in July. Student loans held by the federal government increased
only $1.1 billion. That's the smallest gain since December 2010 and
below the recent monthly gain of $5 billion-$6 billion, according to
Paul Edelstein, director of financial economics at IHS Global Insight, a
forecasting firm.
The slowdown may have
occurred because the government's student loan rates were expected to
have increased in July. The rate increase eventually was pushed back
until July 2013.
Overall, Americans'
finances are improving, the New York Fed said in its report. Fewer
people are falling behind on their mortgages or credit card debt.
And consumers are saving
more. Americans saved 4 percent of their after-tax income in the second
quarter. That's up from 2.5 percent when the recession began.
The weak job market is
putting more pressure on the Federal Reserve to provide more help to the
anemic economy. Fed officials will meet Wednesday and Thursday.
Economists expect the central bank to announce another round of bond
buying to put downward pressure on long-term interest rates.
The economy is growing too
slowly to boost business and consumer confidence and spur sustained
gains in spending and hiring. Overall economic growth slowed to an
annual rate of just 1.7 percent in the April-June quarter and analysts
don't expect much of a pick-up for the rest of the year.
Overall, Americans have
been steadily paring debt since the financial crisis. Household debt,
including mortgages and home equity lines of credit, has declined for 16
straight quarters to $12.9 trillion in March, according to a separate
Fed survey on consumer finances. That's down from $13.8 trillion in
March 2008.
Some of that debt has been
removed by defaults, such as foreclosures. But Americans are also
repairing their finances by paying down debts.
The Fed's monthly consumer
credit report covers auto loans, student loans and credit cards. Unlike
the quarterly Fed report, it excludes mortgages, home equity loans and
other loans tied to real estate.
File photo (MGN)
