Americans keep credit cards locked away

08.13.09
By Nicholas Storie

It seems most American consumers are not in the mood for shopping these days, as new figures from the Commerce Department show a surprise drop in retail sales.

The news follows last week's data from the Federal Reserve revealing a fall in consumer credit, as more people pay down credit card debt, cut back on spending and do not qualify for new accounts.

Retail sales declined by 0.1 percent in July, but economists had been anticipating a rise of 0.7 percent, the Associated Press reports.

"The U.S. consumer remains very weak," Jennifer Lee of BMO Capital Markets, told the AP. "The jobs situation, while slowly improving, is still dismal."

With many families continuing to worry about job loss, and several others dealing with salary cuts or a reduction in benefits, experts say it is unlikely to note a significant rise in retail spending any time soon.

In further proof that Americans continue to be budget-minded, Wal-Mart reported profits on Thursday that showed sales fell 1.2 percent in the second quarter of the year.

Over the past several months, the discount chain has been one of the few bright spots in otherwise dismal reports from retailers across the country.

Wal-Mart CEO Mike Duke said that current trends show Americans are still seeking out value and showing spending restraint.

He also said the company has noticed more people are paying for purchases with cash and debit cards, rather than with credit cards.

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Americans are paying off credit card debt, rather than spending.