Consumers Cut Borrowing By $12B In August

CHRISTOPHER S. RUGABER

WASHINGTON (AP) — Consumers reduced their borrowing for the seventh straight month in August, as households worked to pay off debt and banks reduced credit card limits.

Americans are saving more and borrowing less as widespread job losses, stagnant wages and dwindling home values have spurred a move to greater frugality. While that's a positive trend in the long run, economists say, it can weaken the fledgling recovery as consumer spending powers about 70 percent of the economy.

The Federal Reserve said Wednesday that total consumer debt outstanding fell in August by $12 billion, a 5.8 percent annual rate. Wall Street economists expected a $10 billion decline.

That follows a downwardly revised drop of $19 billion, or 9.1 percent, in July, the largest decline in dollar terms on records dating from 1943. July's decrease was the steepest percentage drop since a 16.3 percent decline in June 1975.

"Consumers are clearly becoming much more conservative about their spending habits (and) paying down debts," said Zach Pandl, an economist at Nomura Securities. "This is likely to continue."