U.S. households cut the nation’s level of consumer credit for the seventh consecutive month. Consumer credit declined $12 billion in August, according to a Federal Reserve report released Wednesday, that’s more than the $10 billion economists expected.
The decline in consumer credit has continued through most of 2009 as banks and credit card companies have limited the extension of credit lines to consumers since the credit crunch last fall.
The slowdown in consumer spending has also led to the overall decline in debt as U.S. households put off large purchases that need to be financed, such as automobiles.
The aftermath of the program showed up in the September auto sales numbers, down 35 percent to a 9.2 million annual pace. The sales figures are clear evidence that auto loans will be down for September compared to August.
Revolving debt, such as credit cards, decreased by $9.91 billion in August, equaling a 13.08 percent annual decline, to $899.4 billion. The drop in revolving debt is the largest are record and marks the eleventh straight month of decline for that credit type.
Signs of the credit decline slowing are mute as sales of many financed items continue to sag. Orders for durable goods posted an unexpected 0.8 percent decline in August.
It is likely U.S. consumers will continue to work of debt to more reasonable levels as the employment outlook remains weak. Unemployment hit 9.8 percent in September as another 263,000 payrolls were shed during the month. That marks the highest rate since 1983.
Total consumer credit stands at $2.46 trillion following the 5.8 percent decline in August. The current seven month decline is the longest streak since 1991.
