Consumer credit drops for first time in 11 months
WASHINGTON (MarketWatch) -- Consumer credit declined in July for the first time in 11 months as Americans turned to their plastic less and as growth in student loans cooled, according to data released Monday.
Consumer credit fell at a seasonally adjusted annual rate of 1.5% to $2.71 trillion, the Federal Reserve said.
The Fed also made a substantial upward revision from December 2010 onwards, with June growth reaching 5.3% from a previously reported 3% and May growth of 8.7% from a previous estimate of 7.8%. June's level of credit was revised up to $2.71 trillion from $2.58 trillion.
Revolving debt like credit-card borrowing fell for the second month with a 6.8% slide.
"Households appear willing to run up credit card balances, but only on a limited and temporary basis. This translates into alternating months of increases and decreases in revolving credit balances since early last year," said Paul Edelstein, director of financial economics at IHS Global Insight, in a note to clients.
But the larger nonrevolving category like auto and student loans saw a slowing of the growth rate, down to just 1% from 9.8% in June.
Though the Fed doesn't specifically identify car and student loans, the category that's closest edged down 0.2% while another that's basically student loans rose 0.2%.
"The smallest increase in student loans since December 2010 could simply be a result of the interest rate hike that was set to go into effect in July before President Obama signed into law a one year extension. Potential borrowers may have returned to the market in August once the smoke cleared," Edelstein said.
The caution around credit came even as retail sales generally and car sales in particular were fairly strong in July. Total retail sales, and auto sales in particular, each gained 0.8% in July, the Commerce Department separately reported.