U.S. consumers’ credit card balances declined for the third consecutive month in August, evidence that Americans may be growing more cautious about the economy.
Consumers’ revolving credit, which primarily reflects money owed on credit cards, fell by a seasonally adjusted $883.4 million in August, or at a 1.25 percent annual rate, the Federal Reserve said Monday. Over the past 3 months, revolving balances have declined by more than $6 billion.
However, consumers stepped up other types of borrowing in August. Nonrevolving debt, a category dominated by automotive and student loans, increased by $14.51 billion, or at an 8.0% annual rate, in August.
That type of debt has risen steadily for two years.
The gains caused total consumer debt outside of home loans to advance by $13.63 billion in August.
The data is consistent with other trends in the economy showing that Americans are willing to make big-ticket purchases, such as buying homes, cars and investing in their education, yet are easing spending on everyday items.
That could be a troubling signal because the economy is heavily reliant on those dollars to continue growing. That’s especially true now that the federal government shutdown, which began last week, threatens to curtail public sector spending for the remainder of the year and has caused hundreds of thousands of workers to be furloughed.
The uncertainty caused by Washington gridlock could cause overall credit growth to ease, especially if a prolonged debt ceiling fight makes consumer skittish about financing cars, appliances and other long-lasting goods, said Bill Hampel, chief economist at the Credit Union National Association.
“Consumers have the ability and need to replace big-ticket items, but it’s also really easy to postpone those purchases for a couple of months if they get nervous,” he said.
Overall consumer spending advanced 3.2 percent in August from a year earlier, according to Commerce Department data. The Fed’s report provided additional details on the amount of auto and student loans for the first time, though the latest data reflect June figures.
In that month, the end of the second quarter, consumers held $1.18 trillion in student debt on a non-seasonally adjusted basis, up 9% from a year earlier. Americans’ auto loan balances totaled $840.5 billion in June, up 8% from a year earlier.
(Source: The Wall Street Journal, 8 October 2013)