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WASHINGTON (AP) — Consumer borrowing is expected to fall for a fifth consecutive month in July as households keep cutting back on their use of credit.

Economists surveyed by Thomson Reuters expect consumer borrowing to show a decline of $3.8 billion at an annual rate in July. The Federal Reserve will issue the latest borrowing report at 3 p.m. EDT Wednesday.

In June, consumer borrowing dropped at an annual rate of $1.3 billion, marking the 16th drop in overall credit in the past 17 months.

Americans cut back on their use of credit cards in June for a 21st straight month, a drop that offset a rise in the amount of borrowing done in the category that includes auto loans.

Households are borrowing less and saving more and that has acted as a drag on the overall economy by lowering consumer spending which accounts for 70% of economic activity.

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Economists expect that trend to continue as long as incomes and employment don't show significant improvements.
The government reported Friday that the unemployment rate in August climbed to 9.6 percent in August, up from 9.5% in July as payroll jobs fell by 54,000. The jobless rate has shown scant improvement after hitting a high for this downturn of 10.1% last October.

Households have struggled to repair their balance sheets in the aftermath of the worst recession the country has experienced since the 1930s.

The Fed's credit report covers credit card debt, auto loans and other debt not secured by real estate. It does not cover home mortgagees or home equity lines of credit.

More Americans are choosing debit cards over credit. Check out this MainStreet article to find out why.

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