U.S. Households Credit Card Debt Declined
June 9, 2007
The Federal Reserve reported that consumer borrowing rose at an annual rate of 1.3 percent in April, to $2.6 billion, the smallest increase since October. That's down from a 7 percent jump in March.
The rise in total debt was far below the $6 billion increase that had been expected. Economists were looking for some slowdown given that debt rose by $14 billion in March, the biggest increase in four months.
The slowdown was led by a 0.5 percent rate of decline in the category of debt that includes credit cards. That meant consumers were paying off more credit card debt than they incurred in May, something that had not happened in 13 months. The category of credit that includes auto loans posted a 2.3 percent rate of increase in April, down from a 5.7 percent rate of gain in March.
Analysts claimed the cutback in spending was due to lack of available funds from mid- and low-income groups -- thanks in no small part to high gas prices -- and increasing reluctance by lenders to extend credit to risky or "subprime" borrowers.
The pullback on credit card spending was part of an overall drop in consumer confidence, as high gas prices and the ailing housing market contributed to low ratings in the RBC Consumer Confidence index. Even with rising wages and strong employment, many Americans feel anxious and want to spend less, according to the report.