Are Americans falling out of love with their credit cards again?
Consumer borrowing unexpectedly fell $3.3 billion in July, driven entirely by a drop in revolving credit, the category that includes purchases made with plastic, according to a Federal Reserve survey released Monday.
The decline was a big surprise – estimates in a Bloomberg survey of 37 economists had been for gains of $5 billion to $15 billion. It follows some conflicting reports on consumer confidence, underscoring the slow pace of the economic recovery.
The July decline, which broke a string of 10 consecutive monthly increases, was driven by a $4.8-billion drop in revolving credit. According to the American Bankers Assn., revolving credit remains 17% below its prerecession peak.
Non-revolving borrowing, such as for car purchases or student loans, has increased for 11 months in a row. But that category grew only $1.6 billion in July, its smallest gain in nearly a year.
Recent economic reports, including weak employment numbers, and notes from the Fed’s last policymaking session have many economists predicting that the Fed this week may announce another round of bond buying. The intent would be to stimulate the economy by keeping interest rates at rock bottom.