U.S. consumers reduced their debt in May for the fourth consecutive month, the Federal Reserve reported Wednesday. Total seasonally adjusted consumer debt fell $3.22 billion, or a 1.5% annual rate, in May to $2.52 trillion. Consumer credit fell in eight of the past ten months. The drop in May is the smallest of the group. This is the longest string of declines in credit since 1991. Credit-card debt had the biggest drop in May, falling $2.86 billion, or 3.7% to $928 billion. Non-revolving credit, such as auto loans, personal loans and student loans. fell $367.1 million or 0.3% to $1.59 trillion.
The graph above shows the year-over-year (YoY) change in consumer credit. Consumer credit is off 1.8% over the last 12 months. The record YoY decline was 1.9% in 1991 – and that record will be broken over the next couple of months.
Note: Consumer credit does not include real estate debt.
Good news, bad news scenario being played out.-this correction was desperately needed; consumers were over-extended.-credit availability is tightening up, with 38% fewer credit cards issued recently than LY. Add to that the reality that lenders reducing credit limits on existing and new cards, and this will negatively impact consumer spending-paydown on consumer debt plus increased savings is taking spendable dollars off the table and, based on the reported retail sales today for June, it's hurting retail sales.