October 8, 2009
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News: Americans Remain Serious About Reducing Debt
According to the newest report by the Federal Reserve, Americans continue to do a good job of reducing debt and credit card spending. The report released on Wednesday indicated that the nation's card debt has dropped significantly by 13.1 percent in August to $899.4 billion while overall debt fell 5.8 percent to $2.46 trillion. Overall debt includes debt other than credit card like auto loans, mortgages, and recreational vehicle loans. It is the seventh consecutive month that the nation has witnessed a decline in credit card debt; the longest record since 1991. It's a double edged sword for the economy because a healthy economy is dependent on consumer spending for balance. However, with unemployment numbers continuing to experience record breaking numbers and concern over banks continued push to raise interest rates and levy stiff penalties, consumers have pulled back significantly.
Americans are also doing a better job at saving. According to the Consumer Federation of America, personal savings accounts increased by 4.2 percent in July. Most likely Americans are depositing the money into savings that would have been previously allocated for credit card spending. Job loss is a major concern for most Americans which appears to be pushing many to prepare for the worst by curbing credit card spending and building an emergency fund. President Barack Obama recently voiced the same concerns and said his administration will continue to explore resolutions to the growth of the U.S. economy.
In wake of the reduced credit card debt, increase in personal savings, and rising unemployment, some positive events indicate the economy is beginning its slow recovery. According to the Commerce Department, retail sales for the month of August saw a moderate increase of 1.3 percent. Additionally, lenders are more optimistic with forecasts for future earnings as defaults and delinquencies begin to taper off. Gains in stock have also been realized as the S&P reports moderate increases and income levels rose slightly by 0.2 percent in August.