Consumer credit falls a record 11 months in a row(Read article summary)
Consumer credit fell in August, mostly because of a $10 billion cutback on credit-card spending.
Americans reined in their credit card and other consumer debt in August for a record 11th month in a row, a sign that households are not finished repairing their balance sheets.
Total consumer credit fell $12 billion, the Federal Reserve reported Wednesday. That decline was larger than expected. Analysts had forecast something closer to $9-10 billion. Consumer credit includes most kinds of nonmortgage debt, such as credit cards, education loans, and auto loans.
Credit-card balances fell nearly $10 billion, according to the report, while nonrevolving credit (which includes automobile loans) fell only $2 billion, buoyed by August's "cash for clunkers" program.
In postwar history, the United States has never before seen a year-over-year decrease in outstanding consumer credit. The totals in August were more than 4 percent below last August's total.
More declines in credit are expected, given the plunge in Americans' net worth.
"Since the peak in July 2008, consumer credit outstanding has fallen by $119 billion as households struggle to get their balance sheets in order after asset prices melted down," writes Joshua Shapiro, economist with MFR Inc., in an analysis. "To put matters into perspective, the Federal Reserve reports that as of the end of Q2, the value of household net worth had plunged by $11 trillion from its peak in Q3 2007.... While representing a good start, the deleveraging that the household sector has accomplished to date is just that, a start."