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US consumer credit down as appetite for debt diminishes

City A.M. Reporter
TOTAL US consumer credit fell by a greater-than-expected $11.98bn (&pound;7.5bn) in August, according to Federal Reserve data released yesterday, suggesting consumers are opting to cut their debt rather than spend.<br /><br />Analysts said the drop, the seventh consecutive monthly decline, was unsurprising given the high level of unemployment, and was further confirmation that consumers would not be leading the economy&rsquo;s recovery from the worst recession in 70 years.<br /><br />August consumer credit outstanding dropped at a 5.81 per cent annual rate to $2.46 trillion, the US central bank said. A panel of analysts undershot the figure, forecasting a $10bn fall.<br /><br />July&rsquo;s figures were revised to show an $18.98bn drop, previously reported as a record $21.6bn decline.<br /><br />&ldquo;This is the clearest evidence of consumer deleveraging that we have. Consumers are actively saving more, borrowing less and paying back their credit card balances and other debt,&rdquo; said Zach Pandl, an economist at Nomura Securities International in New York.<br /><br />Pandl added: &ldquo;This is a positive thing in the long-run, but in the short term it is negative for growth. People spending less means demand will be weaker and employment will be weaker.&rdquo;