By JEFF BATER (Wall Street Journal
WASHINGTON -- Americans cut their borrowing a fifth time in a row in June, underscoring how consumer caution could dog the economy's recovery. Consumer credit outstanding fell at a seasonally adjusted annual rate of 4.9% to $2.503 trillion, according to Federal Reserve data. The drop outpaced analysts' expectations. The big retreat in borrowing points to weakness in the economy even as hints of recovery emerge. Earlier Friday, the government reported the U.S. unemployment rate edged down in July to 9.4%. Job losses were lower than expected, too. Last week, the Commerce Department reported gross domestic product receded April through June just 1.0%, far less than the contraction over the prior nine months.
But consumers are focusing on rebuilding their savings that have been slashed by the recession. Wall Street analysts had projected a $4.1 billion decline in consumer credit during June. The actual $10.3 billion drop marked the fifth consecutive decline. Consumer credit in May decreased $5.4 billion, adjusted down from a previously estimated $3.2 billion drop. Borrowing hasn't fallen so many months in a row since 1991, when credit fell June through December. Revolving credit, which includes credit-card use, dropped in June by $5.3 billion to $917.0 billion. It was the 10th drop in a row, which is a record. Revolving credit fell $4.9 billion in May. Non-revolving credit, including automobile and mobile home loans, decreased in June by 3.8%, or $5 billion to $1.586 trillion. Non-revolving credit in May decreased 0.4%, or $506 million.
The consumer-credit data exclude home mortgages and other real estate-secured loans. These tend to be highly volatile from month to month and are frequently revised. But the report still has interesting details on how Americans finance their lifestyles.
