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U.S. consumer credit declined $10.3 billion in June to $2.5 trillion, according to the Federal Reserve, as households remained reluctant to borrow money and banks continued to practice more restrictive lending terms. It was the fifth consecutive month-to-month decline, the longest run since 1991.
Revolving debt, 98% of which is credit cards, decreased 57 basis points in June, to $917 billion from $922.3 billion the previous month. It marked the 10th consecutive month-to-month decline. A basis point is one-hundredth of a percentage point.
Falling home values, stagnant wages and rising unemployment mean consumer spending will take time to recover even as the recession
While the downturn abated in the second quarter as government stimulus programs began to kick in, the three-month period ended June 30 capped the worst retrenchment by consumers since 1980, according to the Commerce Department. Gross domestic product shrank at a better-than-forecast 1% annual pace after a 6.4% drop the prior three months.
Whereas revolving credit fell in June, the percentage of consumers who expressed concern regarding the economy continued to trend upward in July, according to survey data Discover Financial Services released last week. Some 61.2% of 8,200 consumers surveyed in July said economic conditions were poor, two percentage points higher than the previous month. The percentage of respondents who said they thought the economy was getting worse increased to 52.1% from 49% who said so in June.
