Consumer Credit Down 1.8% in July

Consumer credit declined for the sixth straight month in July, according to the Federal Reserve. It fell at an annualized rate of 1.8% during the month. That might not sound like a lot, but it's the biggest drop since April. Although shrinking revolving credit continues to drive the trend, non-revolving credit was nearly flat during the month.

Here's the chart, since the recession began:

consumer credit 2010-07.png

Total credit fell $3.6 billion during the month to $2.419 trillion. That's the lowest it's been since March 2007. As mentioned, revolving credit drove the decline, falling by $4.2 billion or 6.3% on an annualized basis. Its current level of $828 billion is the least since November 2005. Non-revolving credit was up slightly during the period by $1.6 billion, an annualized rate of 0.6%.

That non-revolving credit increase was due in large part to the federal government increasing its holding of consumer debt. Its balance, which is entirely non-revolving, rose by 4.4%, at an annualized rate of 24%. Since the end of 2008, the federal government's holdings have increased by $116 billion, or 104%.

As for other major holders of credit, almost all the their balances were close to flat in July, except for pools of securitized assets, which continued their march downward. They fell by $3.5 billion, at an annualized rate of 29%.

Credit continues to decline for two reasons. Consumers are trying to strengthen their balance sheets by paying down their debt. Banks have also tightened their underwriting standards, so credit is harder to get. These trends will likely continue until the economy begins to see broad improvement.

Presented by

Daniel Indiviglio was an associate editor at The Atlantic from 2009 through 2011. He is now the Washington, D.C.-based columnist for Reuters Breakingviews. He is also a 2011 Robert Novak Journalism Fellow through the Phillips Foundation. More

Indiviglio has also written for Forbes. Prior to becoming a journalist, he spent several years working as an investment banker and a consultant.

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well. Bestselling author Mark Bittman teaches James Hamblin the recipe that everyone is Googling.

Join the Discussion

After you comment, click Post. If you’re not already logged in you will be asked to log in or register.

blog comments powered by Disqus

Video

How to Cook Spaghetti Squash (and Why)

Cooking for yourself is one of the surest ways to eat well.

Video

Before Tinder, a Tree

Looking for your soulmate? Write a letter to the "Bridegroom's Oak" in Germany.

Video

The Health Benefits of Going Outside

People spend too much time indoors. One solution: ecotherapy.

Video

Where High Tech Meets the 1950s

Why did Green Bank, West Virginia, ban wireless signals? For science.

Video

Yes, Quidditch Is Real

How J.K. Rowling's magical sport spread from Hogwarts to college campuses

Video

Would You Live in a Treehouse?

A treehouse can be an ideal office space, vacation rental, and way of reconnecting with your youth.

More in Business

Just In