Consumer Comeback Blog

U.S. Consumer Credit Drops $3.28 Billion

U.S. Consumers continued the trend of keeping their credit cards on ice, leading to a $3.28 billion drop in consumer credit levels in July. The reduction was the second straight decline in credit-card debt in almost a year, Bloomberg reported.

Many economists were predicting that consumer credit would rise by at least $9.1 billion,reported The Chicago Tribune. One of the largest decreases was in revolving credit—a category that includes credit card spending—which decreased by $4.82 billion, the largest decrease since April 2011, said the Federal Reserve.

While consumers generally see reducing their credit-card debt to be a good thing, economists view a household’s reluctance to take on more debt as a sign about a negative opinion of the state of the economy. The reduction in credit-card debt followed a lackluster jobs report on Friday and a recent report on the rise of in consumer pessimism, reported BusinessWeek.

Revolving credit has declined three of the last four months, which hasn’t happened since early 2011 and is something that the Tribune considers to be a sign of “wobbliness seen in the economy in recent months.” However, reductions in consumer credit do not necessarily reflect a decline in consumer spending. Retail sales rose 0.8%, twice the predicted rate, in July, reported Business Insider.