Consumer credit declines in May.
Consumers across America are slowly paying off their debt, continuing a trend has been exhibited in 18 of the last 20 months.
According to the latest report from the Federal Reserve [Board], the amount of money consumers owe to creditors declined at an annualized rate of 4.5 percent in May. That number equates to a drop of about $9.15 billion in consumer debt. The new national number for total consumer debt is $2.42 trillion. This was the fourth month in a row that consumer credit declined. There was an even sharper decline the previous month, when consumer debt fell $14.86 billion.
The drop in consumer credit was driven by a deep decline in revolving credit, which is typically associated with credit card payments. According to the Fed’s numbers, consumers were able to shed $7.4 billion from the previous month in that category alone, accounting for a 10.5 percent annualized decline. Non-revolving credit, meanwhile, declined at an annualized rate of 1.5 percent, as consumers paid off $1.8 billion in debts on things like mortgages, cars loans, student loans and so forth.
According to a report from Businessweek, the May decline was even greater than was forecast by economists, which it says is a sign that Americans are now less willing to take on debt without improvement in the labor market. Consumer credit has only increased twice since the end of 2008 – the start of the current recession – and that means consumer spending will likely continue to be restrained.
