Consumers Continue To Cut Debt
Sure, The Ticker gets tired of reporting bad economic news all day -- the bad news that happens and the bad news we see in what happens.
So here's some good news: The Federal Reserve said today that U.S. consumers cut their debt for the fifth straight month in June, putting more into their bank accounts and less onto their credit cards.
Consumer debt in June dropped nearly 5 percent to $2.5 trillion. Okay, so that's still a lot. But what's important is that consumers are using more of their cash to pay off those 25-percent credit card loans, and that's good news in an over-leveraged economy.
This marks the longest pullback in consumer credit since the second half of 1991, which tells you just how long we've been spending our socks off.
At the same time, the U.S. saving rate jumped 5.2 percent in the second quarter, the highest rate since 1998. More good news.
The bad news: Americans still have nearly $1 trillion on their credit cards ($917 billion). The good news: We shaved $5.3 billion off of that in June. So, way to go!
There are those who will say that this will cripple a U.S. economy that is 70-percent based on consumer spending and still mired in a recession.
The way we look at it right now is that the government is busy stimulating the economy -- to the tune of $787 billion over the next year-plus -- so this is a good time for individual consumers to get their house in order.
Each person's contribution to the stimulus is small -- the cost is spread across society, like insurance -- so Americans will feel less pain from paying their cut of the stimulus than by carrying large credit card bills. So keep at it, America.
August 7, 2009; 5:40 PM ET
Categories: The Ticker | Tags: consumer spending, credit cards, debt
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