The Daily Collegian
Consumer borrowing drags struggling economy
By Martin Crutsinger
ASSOCIATED PRESS WRITER
WASHINGTON Consumer
borrowing fell again in July as
households cut back on their cred
it card use for a 23rd consecutive
month, adding more drag on an
economy struggling to mount a
sustained rebound.
Borrowing dropped at an annu
al rate of $3.6 billion in July, the
Federal Reserve reported
Wednesday. That marked the 17th
drop in credit in the past 18
months.
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Americans did boost borrowing
for auto loans in July but this gain
was offset by further reductions in
the category that includes credit
cards.
The latest drop in overall bor
rowing was slightly higher than
economists’ expectations and fol
lowed a $1.02 billion decline in
June, which was revised from an
initial estimate that total credit
had dropped by $1.3 billion that
month.
The July decrease represented
a 1.8 percent decline in percent
age terms and followed a 0.5 per-
N ATI ON
cent drop in June. The only
increase in credit that has
occurred since January 2009 was
a small 1 percent rise in January
of this year.
Borrowing in the category that
includes auto loans rose 0.6 per
cent in July after gains of 3.2 per
cent in June and 1.2 percent in
May. The three monthly increases
reflected a revival of auto sales
this summer after automakers
endured slumping sales during
the recession.
Borrowing on credit cards fell
by 6.3 percent in July after a big-
ger 7.5 percent June decline. This
category has now fallen for a
record 23 consecutive months as
Americans have struggled to
repair their household finances
after the worst recession since the
19305.
Households are borrowing less
and saving more and that has
acted as a drag on the overall
economy by lowering consumer
spending, which accounts for 70
percent of total economic activity.
Economists expect households
will continue to cut back on bor
rowing as long as incomes and
Thursday, Sept. 9, 2010 I
employment don’t show signifi
cant improvements.
The government reported
Friday that the unemployment
rate in August climbed to 9.6 per
cent in August, up from 9.5 per
cent in July as payroll jobs fell by
54,000. The jobless rate has shown
scant improvement after hitting a
high for this downturn of 10.1 per
cent last October. The long stretch
of declining borrowing has left
total consumer credit at an annual
level of $2.42 trillion, 6.3 percent
below the peak set in July 2008 of
$2.58 trillion in credit.