Consumer credit expected to decline for record 9th straight month

Ahead of the Bell: Consumer Credit

WASHINGTON — Consumer credit likely fell again in August, acting as a further drag on a sluggish economy.

Economists surveyed by Thomson Reuters expect consumer credit dropped by $3 billion in August following a $3.6 billion decline in August.

If credit did fall as expected in August, it would mark the 18th decline in the past 19 months.

In July, Americans did boost their borrowing for auto loans but that gain was offset by the 23rd-straight monthly drop in the category that includes credit cards.

Analysts say that consumer credit is being constrained by all the problems facing households, including tighter lending standards on the part of banks struggling with high loan losses.

In addition, Americans are struggling to repair their personal balance sheets after the worst recession since the 1930s.

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 percent of total economic activity.

Households are expected to continue to cut back on borrowing as long as incomes and employment don’t show significant improvements.

The Fed’s credit report, to be released at 3 p.m. EDT, covers credit card debt, auto loans and other debt not secured by real estate. It does not cover home mortgages or home equity lines of credit.