Consumer borrowing declined in August as Americans trimmed credit-card purchases, showing consumers remained reluctant to take on more debt as joblessness climbed.
Credit declined by $3.34 billion after falling a revised $4.09 billion in July, more than the previous estimate, according to a Federal Reserve report released today in Washington. Credit card balances decreased for the 24th consecutive month.
The unemployment rate increased to 9.6 percent in August, the first gain in four months, and economists project a report tomorrow will show it rose again last month. A lack of jobs is restraining consumer spending, which accounts for about 70 percent of the economy.
“With unemployment near double-digits and jobs hard to get, it is going to be some time before consumers feel comfortable taking out their credit cards again,” Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said before the report.
The median forecast of 39 economists surveyed by Bloomberg News forecast a $3.5 billion decline in the measure of credit card debt and non-revolving loans. Estimates ranged from a decrease of $7.5 billion to a $1.8 billion gain.
Revolving debt, which includes credit cards, fell $4.99 billion in August, according to the Fed. Non-revolving debt, including loans for cars and mobile homes, rose $1.65 billion for the month. The report doesn’t track debt secured by real estate, such as home-equity lines of credit.
Credit-card delinquencies fell in August as major issuers posted improved numbers, according to a Moody’s Investors Service report issued Sept. 27. The top six credit-card issuers, including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., all reported lower delinquencies for August in regulatory filings.
Some companies are seeing improvement in spending. Discover Financial Services, the payments processor, posted third-quarter profit that exceeded most estimates. “Discover card spending continued to grow nicely this quarter,” Chief Executive Officer David Nelms said in the statement issued Sept. 20.
The jobless rate increased to 9.7 percent last month as the year-old economic recovery didn’t generate enough jobs to keep up with a growing labor force, according to the median forecast of economists surveyed by Bloomberg before a Labor Department report tomorrow.
© Copyright 2024 Bloomberg News. All rights reserved.