Credit card balances fell in July, a month of sluggish summer
consumer spending and languid job growth, extending a pullback in
Revolving debt, which is mainly made up of credit card balances,
was down 2.6 percent, on an annualized basis, the U.S. Federal
Reserve said in its
G.19 consumer credit report
The seasonally adjusted figure came after a string of ups and
downs in revolving debt, which fell at a downwardly revised 5.2
percent rate in
after growing a revised 8.4 percent in May.
"The economy is not all the way back by any type of measure,"
said Donald Dutkowsky, professor of economics at the Maxwell
School of Citizenship and Public Affairs at Syracuse University.
"Consumers have been holding their spending relatively tight."
The amount of revolving debt outstanding was $849.8 billion,
compared with a revised $851.6 billion in June. During the nearly
five years since the financial crisis hit in the fall of 2008, the
amount of revolving debt outstanding has fallen by more than $150
The Fed's measure of total short-term consumer debt -- which
excludes mortgages but includes car loans and student loans as well
as credit card debt -- was $2.85 trillion in July, up an annualized
4.4 percent for the month. During the second quarter of 2013,
consumer credit advanced at a 5.1 percent annual rate, while
the revolving debt component lagged behind at 1.2 percent.
"As much as the economy would like to see greater consumer
spending, households have learned their lesson after the Great
Recession," Dutkowsky said.
Lackluster economy points to low rates
Consumers were spending just a little more freely in July.
Personal consumption spending
rose $16.3 billion or 0.1 percent, according to the U. S. Commerce
Department. That rise matched the 0.1 percent increase in real
disposable income for the month. Real disposable income is
what's left in your pocket after taxes and price increases. The
pace of spending came in below analysts' median expectations.
"This is a disappointing report on a number of levels," TD
Economics Senior Economist James Marple said in a research note.
Hopes for faster economic growth hinge on a pickup in spending from
households and business to offset the drag from the federal
government's package of tax increases and spending cuts known as
"The government sequester is a major headwind on this economic
expansion," Dutkowsky said. "I'm surprised (it) has gone on this
long." The sequester's belt-tightening began squeezing
government spending in March.
The jobless rate edged down to 7.3 percent in August, compared
to 7.4 percent in July and 8.1 percent a year ago, according to the
Labor Department's monthly
. But economists said that even that marginal improvement for
the month had a dark side. The rate decline "was for entirely
the wrong reason -- more workers leaving the labor market," Marple
of TD Economics said in a research note.
The generally weak economic picture leaves little doubt that the
Fed's rate setting body will continue its low-rate policies when it
meets next week, economists say. Analysts expect that
short-term rates -- which determine credit card APRs -- will remain
at their historic lows until about mid- to late 2015.
The Federal Open Market Committee is expected to begin tapering
off its bond purchasing program -- which is designed to keep
long-term rates down -- by the end of the year. An announcement
about the taper could come as soon as the FOMC's meeting next week,
but the unexpectedly weak job numbers could convince the Fed to
extend the stimulus measure longer.
"The August employment leaves the FOMC in a tough spot," Regions
Bank Chief Economist Richard Moody said in an analysis.
The Fed's latest look at consumer credit and debt comes as the
five-year anniversary of the financial crisis approaches.
This month in 2008, Lehman Brothers filed bankruptcy and the
federal government took over the mortgage pipeline companies Fannie
Mae and Freddie Mac, as a collapse in housing-backed securities
nearly froze the financial system.
Household debts have plummeted, then rebounded somewhat since
including mortgages, as measured by the Federal Reserve Bank of New
York, reached a turning point at the end of 2012, marking its first
quarterly gain since the spring of 2008.
"Over the last four years, we've cleared away the rubble from
the financial crisis and begun to lay a new foundation for
stronger, more durable economic growth," said Jason Furman,
chairman of the White House Council of Economic Advisers, in a
statement last week reacting to the job market.
Five years after the crunch, it looks as though U.S. credit card
use may have permanently shifted gears. Back in July of 2008,
consumers had $987.5 billion in revolving debt, about $167 billion
above current levels, according to the Fed's yardstick.
Fed: Credit Card balances spike in May