September 09, 2010
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News: Americans Remain Steadfast
According to a report by the Federal Reserve, Americans continue to swipe their debit card rather than the credit card as borrowing dropped to $2.42 trillion in July; a 6.3 percent drop from the same time last year of $2.58 trillion. Consumers reduced credit card debt for the 23rd consecutive month. Although on a personal level, paying down debt is a smart financial move, it makes it difficult for the economy. As the economy continues to take a slow turn upward, reduced spending works against it since economic growth is dependent on consumer spending. The Federal Reserve report indicated that Americans reduced credit card spending at an annual rate of $3.6 billion in July.
Although Americans managed to reduce credit card spending, they increased their spending on automobiles. As auto loans increased by 0.6 percent in July against a gain of 3.2 percent in June, overall borrowing continued to decline by 1.8 percent in July and a 0.5 percent decrease in June. Experts had expected overall borrowing to be slightly higher than the actual. Overall debt includes auto loans, recreational vehicle loans, and personal loans. Mortgages and line of credits are not included. Auto loan increases were present for the past three months. Credit card borrowing fell by 6.3 percent in July which slightly less than the 7.5 percent decrease in June.
The increase in auto loans was defeated by the decrease in credit card spending which doesn't contribute to a struggling economy that has just seen one of the worst recessions in history. Americans have continued to reduce card spending each month with one exception in January 2010. Experts believe the reduced spending will continue as long as unemployment remains an issue. The unemployment rate continues to hover around 10 percent. In August, unemployment grew to 9.6 percent, up slightly from 9.5 percent in July as the nation lost nearly 54,000 jobs.