Consumers, confronting job losses and weak income growth, likely cut back on their borrowing for a seventh consecutive month in August.
Wall Street economists expect that consumer borrowing fell $10 billion at an annual rate in August, according to a survey by Thomson Reuters. The Federal Reserve is scheduled to release the report at 3 p.m. today.
In July, consumers slashed their borrowing by $21.6 billion, the most on records dating from 1943. That was a 10.4 percent cut at an annual rate, the steepest percentage drop since a 16.3 percent decline in June 1975.
Consumer credit fell by $15.5 billion in June, or 7.4 percent.
The report covers credit cards, auto loans and other revolving credit, and doesn’t include mortgages or other debt secured by real estate, such as home equity lines of credit.
The declines reflect both a drop in demand for credit by consumers, as well as tighter credit standards among banks and other lenders.
Widespread job losses, stagnant wages and declining home values have contributed to Americans’ more thrifty mood.
The Labor Department reported last week that the unemployment rate rose to 9.8 percent in September, the highest in 26 years. Many economists believe the rate will peak above 10 percent sometime next year.
Rising unemployment could put more pressure on beleaguered consumers and further depress their spending, which accounts for 70 percent of overall economic activity. That, in turn, could weaken the nascent economic recovery.
Retailers already are bracing for another meager holiday season. The National Retail Federation said Tuesday that it expects sales during November and December to fall 1 percent from last year. While that’s not as steep a drop as in 2008, last year’s holiday sales saw the worst annual drop on records dating to 1967.
The NRF also expects retail sales for all of 2009 to fall 3 percent. (AP)
