Consumer Debt Load Down 1.7% in June

Consumers reduced their outstanding debt for the fifth consecutive month in June, improving their balance sheets by $1.02 billion, the Federal Reserve reported Friday.

The decline translated into a 1.7% reduction at a seasonally adjusted annual rate and came entirely from a drop in auto loans, which fell by $2.80 billion in June.

The June decrease followed declines in debt of $893 million in May and a huge $3.58-billion drop in April. The April decrease, which translated into an annual rate of decline of 5.9%, was the biggest drop in a decade.

Both consumers and businesses have been busy reducing huge debt burdens built up during the go-go years of the 1980s. Consumer debt has declined 11 times in the last 14 months.

While this process is laying the groundwork for healthier economic expansion in the future, it has had a depressing effect on the economy over the past year because consumers busy paying off old debts have not been in the mood to increase spending.