August saw the decline of consumer borrowing even as Americans cut down on the balances of their credit cards making their intentions clear about not taking on more debt even as unemployment rates continue to climb. Credit failed to even reach the revised July target of 4.09 billion dollars to come down to 3.34 billion dollars according to the Federal Reserve report that was released in Washington. This is the 24th consecutive month that the credit card debts have declined.
The rate of unemployment meanwhile has reached 9.6% in August gaining for the first time in 4 months. Reports from economists show that it rose in the last month. Consumer spending which contributes 70% to the economy is declining. According to chief macro strategist at Wells Fargo Advisors in St. Louis, Gary Theyer, the consumers are spending money with a touch of caution and their debts are down. It is considered to be in the long term although it is holding back the economy a bit currently. Meanwhile Bloomberg news surveyed 39 economists and the median forecast predicts a 3.5 billion dollars decline in the credit card debt and non-revolving loans. The estimates have ranged from a decline of 7.5 billion dollars to 1.8 billion dollar gain. The standard and Poor't 500 Index has also dropped a bit by 0.2 percent touching 1,158.22 in New York at 3:16 pm.
Another interesting bit of development is the drip in the applications for unemployment benefits which fell last week unexpectedly to their lowest lever over the last 3 months which shows that the labor market is thawing.
The number of jobless claims has dropped to 445,000 last week, marking a drop by 11,000. This number is the lowest since July 10th. As per the report from Fed, even the revolving debts that include credit cards have dropped to 4.99 billion dollars in August. Meanwhile loans for cars and mobile homes which make up the non-revolving debt has increased by 1.65 billion dollars during the month although, debt secured by real estate including home equity aren't tracked by the report. The delinquencies on credit card also fell as most credit card companies have posted good numbers. Companies like Discover Financial Services have seen improvements in spending as well. All the top credit card issuers have reported lower delinquencies in their regulatory filings in August. As per economists surveyed by Bloomberg, enough jobs haven't been generated to keep up with the growing labor force.