http://www.bloomberg.com/news/2010-10-07/u-s-consumer-borrowing-fell-in-august-on-decline-in-credit-card-purchases.html

U.S. Consumer Borrowing Fell in August on Drop in Credit Cards

By Vincent Del Giudice - Oct 7, 2010 2:17 PM CT

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Oct. 7 (Bloomberg) -- Diane Offereins, president of payment services at Discover Financial Services, talks about the outlook for the credit-card company and the implications of the U.S. Justice Department’s settlement of an antitrust complaint with Visa Inc. and Mastercard Inc. Offereins, speaking with Margaret Brennan on Bloomberg Television’s “InBusiness,” also discusses consumer spending habits. (Source: Bloomberg)

Consumer borrowing declined in August as Americans trimmed credit-card balances, showing consumers remained reluctant to take on more debt as joblessness climbed.
Credit declined by $3.34 billion after falling a revised $4.09 billion in July, more than the previous estimate, according to a Federal Reserve report released today in Washington. Credit-card debt decreased for the 24th consecutive month.
The unemployment rate increased to 9.6 percent in August, the first gain in four months, and economists project a report tomorrow will show it rose again last month. A lack of jobs is restraining consumer spending, which accounts for about 70 percent of the economy.
“People are spending cautiously and getting their debts down,” said Gary Thayer, chief macro strategist at Wells Fargo Advisors in St. Louis. “It’s holding back the economy, but it’s good for the long-run.”
The median forecast of 39 economists surveyed by Bloomberg News forecast a $3.5 billion decline in the measure of credit card debt and non-revolving loans. Estimates ranged from a decrease of $7.5 billion to a $1.8 billion gain.
Stocks held earlier losses after the report. The Standard & Poor’s 500 Index fell 0.2 percent to 1,158.22 at 3:16 p.m. in New York. Treasury securities were little changed.
Fewer Claims
A report from the Labor Department today showed applications for unemployment benefits unexpectedly fell last week to the lowest level in three months, indicating the labor market may be thawing. Jobless claims dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10.
Revolving debt, which includes credit cards, fell $4.99 billion in August, according to the Fed’s report. Non-revolving debt, including loans for cars and mobile homes, rose $1.65 billion for the month. The report doesn’t track debt secured by real estate, such as home-equity lines of credit.
Credit-card delinquencies fell in August as major issuers posted improved numbers, according to a Moody’s Investors Service report issued Sept. 27. The top six credit-card issuers, including JPMorgan Chase & Co., Bank of America Corp. and Citigroup Inc., all reported lower delinquencies for August in regulatory filings.
Some companies are seeing improvement in spending. Discover Financial Services, the payments processor, posted third-quarter profit that exceeded most estimates. “Discover card spending continued to grow nicely this quarter,” Chief Executive Officer David Nelms said in the statement issued Sept. 20.
The jobless rate increased to 9.7 percent last month as the year-old economic recovery didn’t generate enough jobs to keep up with a growing labor force, according to the median forecast of economists surveyed by Bloomberg before a Labor Department report tomorrow.
To contact the reporter on this story: Vincent Del Giudice in Washington vdelgiudice@bloomberg.net
To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net