Consumer credit falls for fourth straight month

07.11.09
By James Conroy

It would appear that Americans have learned a lesson during the current recession and cut back on their credit card debt as new figures show that consumer credit fell in May for the fourth straight month.

The statistics released this week from the Federal Reserve show that consumer credit fell 1.5 percent in May with the amount of total debt falling to just over $2.5 trillion. While this is still a massive number to most Americans, the amount of debt consumers have been cutting back on may be just as staggering.

Since the beginning of 2009, U.S. consumers have reduced their total amount of debt by just under $42 billion - a drastic change over the last few years when Americans continued to rack up credit card debt, mortgages, car loans and other forms of debt.

This means that in the first five months of 2009, Americans have essentially erased the $43 billion in debt that was taken out between the end of 2007 and the end of 2008.

While May's $3.2 billion drop in consumer credit marked the continuation of a trend during the economic downturn, it was less than the drop expected by industry experts who had predicted credit to fall by almost $9 billion.

One reason for the reduction in consumer credit may be more Americans saving money as government numbers released in June showed that the personal savings rate increased to 6.9 percent in May - up from April's figure of 5.6 percent.

But experts predict that once the economy begins moving again, savings will start to trickle into the coffers of retailers once again.

"Once consumers feel a little safer about the economy and their own jobs, they're going to spend some of that savings," John Canally, economist at LPL Financial told the Associated Press.

More Economic Crisis Articles | More Credit & Debt Articles | News Home | Discuss in our Forum

With consumer credit falling for the fourth straight month, Americans appear to be saving more